5 Top Video Game Stocks To Buy

The video games industry was already a massive industry, but this past year has created a perfect storm for industry growth.

With everyone stuck at home and businesses closed, the only way for many people to get any action is through gaming. Over $29.4 billion in video games were sold through September, before the latest console generation.

Gamers around the world wonder what are the top video game stocks to buy?

It wasn’t all fun and games for the industry in 2020. E3, the biggest gaming event of the year, shut down along with esports tournaments, and arcades. Even video game development slowed, and most publishers released “remastered’ versions of older content.

Digital sales through marketplaces like Steam and the App Store fueled the industry’s growth. In addition, in-game microtransactions increased across the board.

But the economy will inevitably recover. Travel restrictions will be lifted, and people will travel to big events once again. So, which companies could lead their investors to high scores?

Activision Blizzard Has Almost 400 Million Users

Activision Blizzard, Inc. (NASDAQ:ATVI) is a vertically integrated gaming juggernaut that develops, publishes, and distributes games. It also hosts servers for online play and involves itself in esports, and streaming.

BlizzCon, for example, is the company’s answer to E3 and had a fanbase long before economic interruptions. The event brings gamers in for a live experience showcasing Blizzard games, like World of Warcraft, Starcraft, Heroes of the Storm, and Hearthstone.

The company increased year-over-year revenues by about 30%+ in each quarter of 2020. In the third quarter, GAAP-adjusted revenues totaled $1.95 billion, compared to $1.28 billion in the same quarter of 2019.

ATVI pays a regular annual dividend of $0.41 and continued this streak when many other companies halted payouts.

It has diverse revenue streams coming from IP like Call of Duty, Tony Hawk, Skylanders, Warcraft, and Candy Crush. Each caters to a different audience with a slightly different revenue model that still boils down to in-game microtransactions.

Call of Duty alone experienced 4x revenue gains in 2020 based on three times as many monthly active users (MAU). It also broke viewing records for its esports league events.

Overall, the company headed into the holiday season with 390 million MAU. It saw increased engagement and users across the board. Still, its $3.33 billion in debt acts as a drag on its $7.60 billion in cash.

Take-Two Interactive Owns Grand Theft Auto

Take-Two Interactive Software, Inc (NASDAQ:TTWO) is the parent company of 2K Games and Rockstar Games. Between them, these companies form one of the largest video game publishers on the planet.

Its biggest draws are franchises like Grand Theft Auto, Red Dead Redemption, NBA/WWE/PGA 2K, and Sid Meier’s Civilization.

The company also bought Playdots in August 2020 to expand its mobile presence. When combined with Social Point, that gives it a big presence on mobile devices.

It easily doubled its market capitalization over the past year and reported $841.1 million in revenues in its third quarter. After all is said and done, that gave it $99.3 million income for the quarter, and around $400 million for the year.

Mafia and PGA Tour 2K21 contributed to big gains in 2020, but its complicated relationship with streamers, critics, and modders could slow its growth potential.

Electronic Arts Has Licensing Deals Galore

Electronic Arts Inc. (NASDAQ:EA) is one of the biggest sports brands in the U.S., and its licensing deals include the NFL, NHL, Disney, FIFA, and the UFC.

Its franchises include The Sims, Madden, and Battlefield. EA grew through acquisitions, including BioWare, PopCap Games, and Maxis.

The company’s pockets are so deep (it had $5.9 billion in cash) it outbid Take-Two to buy Codemasters for $1.2 billion in December 2020.

This racing game developer strengthens the company’s Need for Speed series, although some critics worry that’s all it will do while consuming the heart of the assets it bought.

Its streaming platform, EA Play, grew to 6.5 million paid subscribers and shows its dedication to a direct-to-consumer model that cuts retailers and marketplaces out. This could draw the ire of marketplaces and console makers.

Sony Doubled Microsoft Launch Sales

Sony Corp (NYSE:SNE) is by far the winner of the console wars in the long run, and its PlayStation 4 was the best-selling video game console in the world in 2019. It also beat Microsoft (MSFT) during the 2020 new generation launch.

The PS5 is estimated to reach up to 18 million units sold in 2021, and it’s not for lack of demand. Sony doubled Microsoft’s launch sales, but that can be attributed as much to manufacturing and distribution than customer demand.

Both consoles had an uphill battle releasing in a year without E3. Sony takes it very seriously though, as its game and network division is its biggest business segment, drawing $20.84 billion in its 2019 fiscal year.

And the console war is just getting started – that it’s in its fifth generation is all that needs to be said about how this gaming stock will survive economic recovery.

Nintendo Turns Back On Adult Content

Nintendo Co., Ltd (OTCMKTS:NTDOY) didn’t release a new console in 2020, but it still raised its lifetime Switch sales over 70 million. It had no problems selling out just as fast in the aftermath of the next-gen console launches.

The company’s secret sauce is creating unique platforms and porting its exclusive IP to them. First-party Nintendo franchises include Zelda, Animal Crossing, Super Mario Bros, and Smash Bros, which combines them all in an all-out brawl.

While other companies rushed into competitive gaming and more adult content, Nintendo maintained its family-friendly appeal. You can confidently hand your 8-year-old a Switch and trust they’ll be safer than on an iPhone.

It’s releasing old content on its new system, but what gamers really want is a Nintendo Switch 2, and rumors are swirling. Once it sees the competition gaining traction, expect to see that new console launch.

But for now, Nintendo is so popular it doesn’t really need to move its characters into mobile freemium platforms. 

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.