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Video Game Sales Surge Back to Back: 4 Stocks to Buy

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Video game sales have been on the rise for the past couple of months as the coronavirus pandemic has kept people confined to their homes. After an impressive first quarter and a rise in sales in April, video game sales surged once again in May, according to the latest figures from NDP.

Coronavirus cases escalated in April and stay-at-home orders were enacted at the federal and state levels. Video games and streaming services became the only sources of entertainment for millions. Although restrictions are being eased and the economy is slowly reopening, fears of a second wave are likely to keep people at home for some more time. Given this, it is likely that they will once again fall back on video games to kill time.

Video Game Sales Continue to Rise

According to latest figures from NDP, spending hit $977 million for hardware, full game sales and accessories. This reflects a 57% jump year over year and the best month since 2008, when the country was hit by the Great Recession. In May 2008, video game sales hit $1.2 million.

Spending on video games has reached $5.5 billion year to date, increasing 18% from a year ago. Also, this is the highest year-to-date sales since 2011’s $5.7 billion. Console sales increased 56% year over year to $235 million and video game sales skyrocketed 67% to $438 million. Accessories revenues topped $304 million, reflecting a 32% surge year over year.

Nintendo Leads the Race

Although Microsoft Corporation (MSFT - Free Report) and Sony Corporation (SNE - Free Report) continued to hype their next-generation consoles Nintendo Co.’s (NTDOY - Free Report) took the game away. Nintendo continued to dominate console sales with the Switch, despite hardware shortages. Animal Crossing: New Horizons remained the top-selling title for the console (and third overall), owing to the online cult it has amassed through social-first gameplay. The first and second spots were taken by Call of Duty: Modern Warfare and Grand Theft Auto V, respectively, on both PlayStation 4 and Xbox One.

According to Research and Markets, the global console games market is expected to grow from $40.6 billion in 2019 to about $57.9 billion in 2020. The major driving force for the console games market is the rapid increase in the number of active gamers across the world. In 2017, there were 2.21 billion gamers worldwide and the number is expected to reach 2.73 billion by 2021. According to Nielsen, 64% of the general population in the USA is gamers. 

Our Choices

Given this sudden surge in sales and upbeat sentiment in the video gaming industry, it makes for an opportune time to invest in gaming stocks that are sure to gain in the near term.

Activision Blizzard, Inc. (ATVI - Free Report) is a leading developer and publisher of console, online and mobile games. The company’s Call of Duty is one of the most-popular gaming franchises globally. Its Overwatch League can be considered a pioneer of the e-sports concept.

The company’s expected earnings growth rate for the current year is 23.1%. The Zacks Consensus Estimate for current-year earnings has improved 9.3% over the past 30 days.  Activision Blizzardsports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nintendo Co. is a worldwide leader in the creation of interactive entertainment. It manufactures and markets hardware and software for its popular home video game systems, including Nintendo 64 and Game Boy.

The company’s expected earnings growth rate for the current year is 2%. Nintendo’s shares have gained 5% over the past 30 days.  The company currently has a Zacks Rank #2 (Buy).

Capcom Co., Ltd. (CCOEY - Free Report) plans, develops, manufactures, sells and distributes consumer video game. Its operating segment consists of Digital Contents, Arcade Operations, Amusement Equipments and Other Businesses segments.

The company’s expected earnings growth rate for the current year is 29.6%. Its shares have gained 9.6% over the past 30 days.  Capcom has a Zacks Rank #2.

DouYu International Holdings Limited (DOYU - Free Report) provides a game-centric live streaming platform. The company operates its platform on both PC and mobile apps. 

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 59.4% over the past 60 days.  DouYU has a Zacks Rank #2.

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