Back to top

Image: Shutterstock

4 Stocks to Watch as Videogame Sales Continue to Soar

Read MoreHide Full Article

The craze for videogames is far from over and gamers have been aggressively spending on content, hardware and software. Many had predicted that the gaming market would slow down once outdoor entertainment and recreation joints open, but that hasn’t been the case.

Spending on videogames has been on the rise, with October turning out to be a great month yet again in terms of sales. This has seen videogame makers like Microsoft Corporation (MSFT - Free Report) , Sony Corporation (SONY - Free Report) , Nintendo Co. (NTDOY - Free Report) , Activision Blizzard, Inc. (ATVI - Free Report) and Electronic Arts, Inc. (EA - Free Report) benefiting.

Videogame Sales Soar

Consumer spending on videogames jumped an impressive 16% in October on a year-over-year basis, reaching an October record of $4.4 billion. Spending rose across all sections that include content, hardware and software.

The maximum spending was on hardware that primarily drove sales. Hardware sales surged a whopping 82% year over year to hit $472 million. Software sales grew 11% on a year-over-year basis.

On a year-to-date basis, spending on hardware, content and accessories hit $46.7 billion, increasing 12% year over year. This once again shows the underlying strength in the industry and how the craze for gaming has continued to grow over the years.

The pandemic saw people spending more on videogames as outdoor entertainment wasn’t possible. Analysts had predicted that the gaming market would slow down once the economy reopens as people would have more outdoor entertainment options. However, that hasn’t impacted the videogaming industry.

Future Holds Promise

October has always been a good month for the videogame industry, as multiple titles are released. This year was no different and gamers continued to spend. Last year saw the release of games like FIFA and Watch Dogs: Legion. This year was even bigger with the release of titles like Far Cry 6, Back 4 Blood, and Nintendo’s Metroid: Dread.

The three titles, Far Cry 6, Back 4 Blood, and Metroid: Dread were also the top-selling titles for the month.

The gaming industry so far has had a great 2021. The first two quarters saw spending rising, and the third quarter was no different.  According to the Q3 2021 Games Market Dynamics: U.S. report by the NPD Group, consumer spending on video games in the United States hit $13.3 billion in the third quarter, jumping 7% year over year.

This also marks the highest third-quarter spend in the history of videogaming. Hardware sales rose 60%, while overall spending on content reached $11.7 billion.

Our Choices

The videogame industry was already thriving and this year so far has proven to be good. Given this scenario, it would be ideal to invest in these videogame stocks.

Electronic Arts, Inc. is a leading developer, marketer, publisher and distributor of interactive games (video game software and content). EA distributes gaming content and services through multiple distribution channels as well as directly to consumers (online and wirelessly) through its online portals.

Electronic Arts’expected earnings growth rate for the current year is 21.7%. The Zacks Consensus Estimate for current-year earnings has improved 5.4% over the past 60 days. EA shares gained 3.7% in the past 30 days.Currently, Electronic Arts has a Zacks Rank 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Microsoft Corporation is one of the leading videogame makers and manufacturers of hardware and accessories. MSFT has been expanding its footprint in the industry and recently announced that it will be acquiring videogame maker ZeniMax Media.

Microsoft is a pioneer in consoles andon Nov 15, its flagship Xbox turned 20 years. The other MSFT launches include Xbox 360 (2005), Xbox One (2013) and the latest Xbox Series consoles (2020).

For the current year, Microsoft’s expected earnings growth rate is 14.9%. The Zacks Consensus Estimate for current-year earnings has improved 6% over the past 60 days. Microsoft shares gained 10.5% in the past 30 days. MSFT has a Zacks Rank #3 (Hold).

Sony Corporation designs, manufactures and sells several consumer and industrial electronic equipment. SONY’s product roster comprises audio and video equipment, televisions, displays, semiconductors, electronic components, gaming consoles, computers and computer peripherals, and telecommunication equipment. 

Sony Corporation’s expected earnings growth rate for next year is 14.1%. The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the past 60 days. SONY shares gained 10.2% in the past 30 days. Sony Corp. currently carries a Zacks Rank #3.

Activision Blizzard, Inc. is a leading developer and publisher of console, online and mobile games. ATVI’s Call of Duty is one of the most popular gaming franchises globally. Moreover, Activision Blizzard’sOverwatch League can be considered a pioneer of the e-sports concept.

Activision Blizzard reported third-quarter 2021 non-GAAP earnings of 89 cents per share, beating the Zacks Consensus Estimate of 71 cents. ATVI’s expected earnings growth rate for the current year is 11%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days.  Activision Blizzard carries a Zacks Rank #3.