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Throughout the technology sector, businesses have been forced to adapt to wildly evolving consumer behavior over the past several years. The video game industry is no exception—but check out why traditional powerhouses like Electronic Arts, Activision Blizzard, and Capcom remain some of the strongest positioned gaming stocks on the market right now.
State of Industry
In recent years, the video game industry has been influenced by the rise of new technologies and a change in demand from gamers. Virtual and augmented reality games are now a playable reality, and just as streaming services like Netflix (NFLX - Free Report) have caused an uproar in television and film, a growing desire for subscription-based and free-to-play games has altered the business model of some companies.
We have also seen a massive spike in the popularity of competitive gaming. Dubbed “esports,” professional gaming competitions are bigger than ever. The world’s top players frequently duel it out in front of massive online audiences for millions of dollars in cash prices.
Furthermore, video games have become increasingly casual thanks to the advent of smartphone gaming. While mobile gaming was once seen as almost a different field entirely, even traditional game publishers have been forced to start designing with the smartphone gamer in mind.
Stocks to Watch
The first video game giant to consider right now is Activision Blizzard , which recently crushed its latest earnings report. Earlier this month, the company posted adjusted fourth-quarter earnings of 86 cents per share, easily surpassing our Zacks Consensus Estimate of $0.72. Activision’s adjusted revenues (including deferrals) of $2.452 billion also cruised past our consensus estimate of $2.265 billion.
Interestingly enough, Activision Blizzard said that sales of its popular Call of Duty franchise actually “underperformed” in the quarter, but this really just highlights the depth of the company’s portfolio right now. Activision Blizzard owns seven franchises with more than $1 billion in life-to-date revenue, and its habit of investing in talented and passionate developers has led to recent hits like Destiny, Overwatch, and Skylanders.
While Activision’s release schedule is a bit lighter in 2017, the company is slated to release a sequel to Destiny, which promises to be one of the industry’s biggest games of the year. Currently, ATVI has a Zacks Rank #2 (Buy).
Another stock to check out is Electronic Arts (EA - Free Report) . In its most recent quarter, EA posted adjusted earnings of $2.45 per share, which surpassed the Zacks Consensus Estimate of $2.15. The company also said that GAAP quarterly revenues (excluding referrals) were up 7.4% to $1.149 billion.
Electronic Arts continued to ride the momentum of its popular Battlefield and FIFA franchises, but it was really its ability to cash in on recent trends that helped the company this quarter. For example, digital revenues grew 20.4% to $685 million thanks to a 15% increase in subscriptions and 16% growth in mobile games. EA is also a Zacks Rank #2 (Buy) right now.
Another Zacks Rank #2 (Buy) video game stock to check out is Capcom (CCOEY - Free Report) . This Japanese developer has been around for nearly four decades, and its current library seems to satisfy gamers’ itch for retro franchises.
Capcom is slated to release an American PC version of its popular Marvel vs. Capcom 3 next week, and the company is also working on a brand new marquee title, Marvel vs. Capcom: Infinite, which should come out later this year. For its current fiscal year ending in March, Capcom is expected to post EPS growth of 15% on sales growth of 20%.
Bottom Line
Overall, it is not the strongest ever time for video games, and some concerns—such as the demand for new consoles—are still looming over the industry. Nevertheless, there are a lot of interesting things happening throughout this market.
Even the stocks with less impressive Zacks Ranks are making headlines. For instance, JAKKS Pacific (JAKK - Free Report) recently gained after an impressive earnings report, and Take-Two Interactive (TTWO - Free Report) just inked a deal to create a new esports league along with the National Basketball Association.
Heck, even Amazon (AMZN - Free Report) is getting in on the action. The e-commerce giant, which purchased video game streaming outlet Twitch in 2014, will now directly advertise and sell games on the platform (also read: Amazon To Sell Gaming Content On Subsidiary Twitch).
Whatever the case may be, we are still looking for the same things when we look for video game stocks: strong sales and the ability to effectively cash in on the latest gaming trends.
A Full-Blown Technological Breakthrough in the Making
Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>
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3 Video Game Stocks to Buy Right Now
Throughout the technology sector, businesses have been forced to adapt to wildly evolving consumer behavior over the past several years. The video game industry is no exception—but check out why traditional powerhouses like Electronic Arts, Activision Blizzard, and Capcom remain some of the strongest positioned gaming stocks on the market right now.
State of Industry
In recent years, the video game industry has been influenced by the rise of new technologies and a change in demand from gamers. Virtual and augmented reality games are now a playable reality, and just as streaming services like Netflix (NFLX - Free Report) have caused an uproar in television and film, a growing desire for subscription-based and free-to-play games has altered the business model of some companies.
We have also seen a massive spike in the popularity of competitive gaming. Dubbed “esports,” professional gaming competitions are bigger than ever. The world’s top players frequently duel it out in front of massive online audiences for millions of dollars in cash prices.
(Also Read: Esports is The Next Billion Dollar Industry: 3 Stocks to Watch)
Furthermore, video games have become increasingly casual thanks to the advent of smartphone gaming. While mobile gaming was once seen as almost a different field entirely, even traditional game publishers have been forced to start designing with the smartphone gamer in mind.
Stocks to Watch
The first video game giant to consider right now is Activision Blizzard , which recently crushed its latest earnings report. Earlier this month, the company posted adjusted fourth-quarter earnings of 86 cents per share, easily surpassing our Zacks Consensus Estimate of $0.72. Activision’s adjusted revenues (including deferrals) of $2.452 billion also cruised past our consensus estimate of $2.265 billion.
Interestingly enough, Activision Blizzard said that sales of its popular Call of Duty franchise actually “underperformed” in the quarter, but this really just highlights the depth of the company’s portfolio right now. Activision Blizzard owns seven franchises with more than $1 billion in life-to-date revenue, and its habit of investing in talented and passionate developers has led to recent hits like Destiny, Overwatch, and Skylanders.
While Activision’s release schedule is a bit lighter in 2017, the company is slated to release a sequel to Destiny, which promises to be one of the industry’s biggest games of the year. Currently, ATVI has a Zacks Rank #2 (Buy).
Another stock to check out is Electronic Arts (EA - Free Report) . In its most recent quarter, EA posted adjusted earnings of $2.45 per share, which surpassed the Zacks Consensus Estimate of $2.15. The company also said that GAAP quarterly revenues (excluding referrals) were up 7.4% to $1.149 billion.
Electronic Arts continued to ride the momentum of its popular Battlefield and FIFA franchises, but it was really its ability to cash in on recent trends that helped the company this quarter. For example, digital revenues grew 20.4% to $685 million thanks to a 15% increase in subscriptions and 16% growth in mobile games. EA is also a Zacks Rank #2 (Buy) right now.
Another Zacks Rank #2 (Buy) video game stock to check out is Capcom (CCOEY - Free Report) . This Japanese developer has been around for nearly four decades, and its current library seems to satisfy gamers’ itch for retro franchises.
Capcom is slated to release an American PC version of its popular Marvel vs. Capcom 3 next week, and the company is also working on a brand new marquee title, Marvel vs. Capcom: Infinite, which should come out later this year. For its current fiscal year ending in March, Capcom is expected to post EPS growth of 15% on sales growth of 20%.
Bottom Line
Overall, it is not the strongest ever time for video games, and some concerns—such as the demand for new consoles—are still looming over the industry. Nevertheless, there are a lot of interesting things happening throughout this market.
Even the stocks with less impressive Zacks Ranks are making headlines. For instance, JAKKS Pacific (JAKK - Free Report) recently gained after an impressive earnings report, and Take-Two Interactive (TTWO - Free Report) just inked a deal to create a new esports league along with the National Basketball Association.
Heck, even Amazon (AMZN - Free Report) is getting in on the action. The e-commerce giant, which purchased video game streaming outlet Twitch in 2014, will now directly advertise and sell games on the platform (also read: Amazon To Sell Gaming Content On Subsidiary Twitch).
Whatever the case may be, we are still looking for the same things when we look for video game stocks: strong sales and the ability to effectively cash in on the latest gaming trends.
A Full-Blown Technological Breakthrough in the Making
Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>