Chronicle Journal: Finance

Top Gaming Stocks To Watch As Netflix Expands Into Video Games

Netflix To Offer Video Games, 4 Gaming Stocks To Watch In Light Of This News.

Gaming stocks may be under pressure along with the stock market pullback as of late. But one thing’s for sure. That is their fundamentals remain intact, at least in the near term as the coronavirus pandemic acts as a short-term tailwind. Netflix (NASDAQ: NFLX) is no doubt one of the biggest beneficiaries during this pandemic, but it sure is not resting on its laurels. The streaming giant just announced that it is planning an expansion into video games and has hired a former Electronic Arts (NASDAQ: EA) executive to lead the effort.  

With the rise of the Delta variant of the coronavirus, the road to a full economic reopening could be one that is still highly uncertain. While that is generally bad news for the economy, the rising popularity of video games has helped put some of the best gaming stocks to buy in the spotlight.

Of course, top video game stocks are still feeling the pressure across the board with growth stocks continuing to be under pressure in the stock market today. This would prompt some investors to offload these profitable names. However, many analysts see gaming as a high-growth industry that will only expand with time. With all that in mind, could budding investors be willing to put down their games consoles and invest in these gaming stocks now?

Top Gaming Stocks To Watch Right NowActivision Blizzard Inc.

Activision Blizzard is one of the largest video game publishing companies in the world. The breakout success of its Call of Duty franchise dated all the way back to 2007. And it redefined the first-person shooter gaming experience for the years to come. However, for those who are new to the scene, this company is a developer and publisher of interactive entertainment content and services.

From its most fiscal quarter, revenue came in at $2.07 billion, beating estimates of $1.78 billion. Activision Blizzard reported earnings per share of $0.84, topping analyst’s estimates of $0.70 per share. It’s no secret that Activision Blizzard is an industry leader that is well-positioned to continue delivering gains to its shareholders. 

Not only is the company financially strong, glimpses of what lies ahead with the company‘s strategy moving forward have also been revealed. Without a doubt, Call of Duty has been a success for the company, where its player count tripled over the past two years. And it is also worth mentioning the ‘Blizzard’ part of its name. After all, Blizzard has gained a lot of success from its franchises like Warcraft and Diable. Like it or not, ATVI stock is still a force to be reckoned with among hot gaming stocks in the stock market.

gaming stocks (ATVI stock)Source: TD Ameritrade TOS

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Zynga Inc.

Activision may have dominated console-focused games, but Zynga is the company behind many successful mobile games. The company initially built its popularity through an alliance with Facebook (NASDAQ: FB). It has established franchises such as Zynga Poker, Words With Friends, and Farmville that continue to bolster the company. In addition, the company has also bought the Echtra game company. This is likely to strengthen Zynga’s development capabilities for future cross-platform projects. 

Also, Zynga has announced its upcoming purchase of Chartboost, which will combine its games with an advertising and monetization platform. Many analysts believe this acquisition could act as a powerful catalyst for the company’s growth. From its first-quarter earnings, revenue came in 68% higher year-over-year to $680 million. Following strong top-line growth, Zynga went on to raise its full-year 2021 guidance for revenue to $2.7 billion, representing a growth of 37% year-over-year. Considering the strong growth in its revenue, would you say that ZNGA stock is a top growth stock to buy and hold for the long run?

top gaming stocks (ZNGA stock)Source: TD Ameritrade TOS

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Sea Ltd.

Sea is probably one of the most-shorted stocks to buy in this list of gaming stocks. For those uninitiated, Sea is a Singapore-based e-commerce and gaming company. From a first glance, you would have thought that it’s the e-commerce business that powered the company higher. But Sea is on this list because of its profitable gaming segment Garena. The company attributed Garena’s growth to the popularity of Free Fire, a self-developed battle royale game that was launched in 2017. In brief, Garena is a global game developer and publisher with a presence in Southeast Asia, Taiwan, and Latin America. It provides access to mobile and personal computer online games.

In its first-quarter earnings report, Sea’s revenue skyrocketed to $1.8 billion, an increase of 146.7% year-over-year. On top of that, the gross profit was $645.4 million, up by 212.1% year-over-year. Zooming in, the digital entertainment business contributed $781.3 million in revenue. The profitability of Sea’s gaming business can be compared to Amazon’s (NASDAQ: AMZN) cloud business which subsidizes the growth of its lower-margin marketplaces. With the gaming segment continuing to generate returns, is SE stock a potential multi-bagger in the long run?

best gaming stocks to watch (SE Stock)Source: TD Ameritrade TOS

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Microsoft Corp.

Many wouldn’t think of Microsoft when it comes to video games. After all, the company is more of a software company than a video game company. But its own Xbox gaming console is now one of the best sellers in the gaming market. That said, Microsoft also began to look at game development verticals, bagging Bethesda game publisher in a $7.5 billion deal with Zenimax. Such a smart acquisition means that Microsoft can lock some of Bethesda’s current and future games as exclusives. Love it or hate it, Xbox Game Pass now boasts more than 18 million subscribers. And this is likely to contribute significantly to the company’s gaming revenue in the years to come. 

In fact, from its recent quarter, gaming is one of Microsoft’s fastest-growing business segments. The post-pandemic recovery should see a rebound in the company’s non-gaming products, driving its growth in 2021 and 2022. Microsoft has long been known as one of the “Big 3” video game companies besides Sony and Nintendo. But with its strong position in the cloud gaming market with Azure, I won’t be surprised if the company looks to potentially expand its cloud gaming market share. With Microsoft looking to thrive in the gaming industry in the near future, will this be enough for you to consider MSFT stock?

NASDAQ MSFTSource: TD Ameritrade TOS
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