4 Video Game Stocks For Your February 2021 Watchlist
February 18, 2021 at 11:23 AM EST
Are These The Best Video Game Stocks To Watch Right Now?
Video game stocks have been one of the biggest beneficiaries during the COVID-19 pandemic. While other entertainment options involving outdoor activities like theme parks and theatres remain closed, many are turning to video games to fill up their leisure time. It also seems to me like the habit of playing video games may be sticky. That means it could remain even when the world returns to normalcy.The Video Game Industry Is Still Hot
Just when many thought the video game industry was about to lose its appeal. On February 17, it is reported that Saudi Arabia’s sovereign wealth fund is pursuing investments in the video games industry. The Riyadh-based Public Investment Fund acquired more than $3 billion worth of stock in three U.S. video-game makers during the fourth quarter, according to a regulatory filing. They include Activision Blizzard Inc., (NASDAQ: ATVI), Electronic Arts Inc. (NASDAQ: EA), and Take-Two Interactive Software Inc. (NASDAQ: TTWO).
After a monstrous rally in 2020, the video game industry continues to flourish. According to NPD Group, total consumer spending on video gaming in the United States continues to soar as it registered a 26% year-over-year rise to $18.6 billion in the fourth quarter of 2020. Notably, the gaming industry recorded a surge in activities across the board. The industry started 2021 on a strong note with increases in the digital console and PC content, mobile, and subscription spending. This pandemic has spiked the number of users on video games, so it is no surprise that financials have reflected positively for these companies. So with that being said, let’s look at four top video game stocks that have been performing well in the stock market today.Best Video Game Stocks To Watch For 2021
First up, Zynga is a company specializing in developing social video games on mobile and social networking platforms. With consumers having more funds to spend on their entertainment needs, the company could see a surge in in-game spending. The company capped off 2020 with a 52% year-over-year increase in revenue during the fourth quarter. If you have been paying attention around you, you wouldn’t be surprised with its earnings. Why? After all, more people have been picking up mobile games during the pandemic. Many are probably playing games on their mobile phone during a meal.Source: TD Ameritrade TOS
Mobile gaming has become the largest market in the video game industry, a trend reinforced by the novel coronavirus. If you are not a gamer yourself, you might still think that Zynga is a struggling game publisher. While that might be true if you ask me a few years back, today Zynga is more than just an investment to capitalize on the stay-at-home trend. The company’s live events, new advertising technology, cross-platform game titles, and new game titles from Peak and Rollic are all the reasons why investors are bullish on ZNGA stock. If you are looking for quality video game stocks at the right price, Zynga may be your best bet.
The next video game stock to include on your watch list is Nintendo. The company is famous for creating consoles such as the Wii, Game Boy, Super Nintendo, and most recently the Nintendo Switch. According to data from NPD Group, sales of video game hardware surged 144% year over year in January, reaching $319 million. This is the highest sales recorded since January 2011, when sales hit $323 million. Amongst them, Nintendo came in as the highest-selling consoles.Source: TD Ameritrade TOS
The strong market presence from Nintendo is not unwarranted. First, the Switch can be used as either a handheld device or a console docked to TV. From this flexibility, it creates more opportunities for engagement with families and friends with exclusive titles like Mario Kart 8, Just Dance, and Animal Crossing, just to name a few. The growth rate for Nintendo looks fantastic. And its stock has risen more than 80% in the past year. If you believe that the Switch could bring more growth to the company, what would happen when the company launches the ‘Switch Pro’? Only time will tell.Glu Mobile Inc.
While Glu Mobile Inc. may be a relatively small-cap video game stock on this list, it is no doubt a high-growth business. The company has grabbed headlines in recent weeks amid an announcement of a massive deal with Electronic Arts. The gaming giant is acquiring Glu Mobile for $2.1 billion with cash. Although both companies have agreed on the acquisition deal, it still needs approval from regulators and to complete other customary closing conditions.Source: TD Ameritrade TOS
One thing the company did well is its acquisitions of game titles. The company has acquired a multitude of tiny game studios. To put things into perspective, the company made total acquisitions of $79 million over the course of ten years. And the return? $2.2 billion. Yes, you saw that right, that’s a 27,000% return in ten years. Now you know why EA is acquiring the company right now.DraftKings Inc.
Even though DraftKings isn’t exactly a video game stock, you can’t deny that online gambling may be a form of video game’ for some adults. And that explains why DKNG stock is on this list. With a year-to-date gain of more than 30%, it is no surprise why many investors are eyeing DKNG stock. And this month, ARK Invest, which focuses on disruptive companies, disclosed a position in DKNG stock. You see, ARK Invest’s optimism is not without reason. With national online gambling growing at a rate of 13.2% annually and more states aiming for legalization, there are good reasons to believe that DKNG stock has more room to expand in the long run.Source: TD Ameritrade TOS
The online gambling sector is poised to enjoy strong growth in the foreseeable future. This comes as more states are looking for ways to get more revenue for their states. If you believe there’s a huge growth runway in the online sports betting space, then DKNG stock is one to watch. However, looking at its current financials, the $23 billion market capitalization certainly doesn’t look cheap. The company would need to capitalize on the surging demand for online betting and favorable government policy. With a bit of good fortune, DraftKings might just be able to grow into its valuation.