The online gaming industry is booming, with more people joining as a form of leisure and entertainment as well as those who are joining as professional gamers.
Engagement for video games trounces pretty much every other form of media. The interactive nature of games means they captivate a player’s attention, and that’s a big advantage in a world where competition for consumer eyeballs has never been more fierce.
There are promising stocks in the video game industry that will likely deliver life-changing returns over the long term. Read on to see why these five video game stocks stand out as great buys this month.
When it comes to shaping the world of interactive entertainment, few companies have played a bigger role than Activision Blizzard (ATVI). The company is an industry leader that looks poised to continue delivering wins and rewarding long-term shareholders.
The company’s core franchises include genre-defining properties such as Call of Duty, World of Warcraft, and Candy Crush Saga. The company also has perhaps the industry’s single best track record of launching and sustaining new hit properties. It combines a powerful force of development studios and marketing expertise, and it will likely continue to play a leading role in the shaping the industry’s growth.
Activision Blizzard also pays a dividend, and the company has been building an impressive payout growth streak despite the stock’s yield looking relatively small. Shares yield roughly 0.4%, while the payout has grown over 170% since the company first initiated its dividend in 2010. Its ability to raise its payout each year is a testament to the company’s consistent profitability, and it looks like Activision Blizzard still has a long runway for dividend and share price growth.
Bilibili Inc. (BILI) has been popular for fans of anime, comics and gaming. Some of the company’s most popular games include Fate/Grand Order and Princess Connect. The company generates revenue not only as a mobile game developer – it also has a steady stream via ads and e-commerce and also by selling virtual gifts on its live video platform.
As of Q3 2020, Bilibili reported that its total number of monthly active users increased 54% year-over-year to 197.2 million. And the total paying users increased 89% to 15 million.
Bilibili has often been compared to YouTube. And Google had announced in its Q4 2020 results that YouTube’s revenue increased 46% compared to the same period in 2019 to $7 billion. This may have also influenced Bilibili’s stock price.
Over the last year, the share price of BILI increased by over 470%. BILI stock has risen 42.7% over the past month, closing at $111.40 on January 7. During this period of time the stock fell as low as $111.40 and as high as $144.46. BILI has an average analyst recommendation of Strong Buy.
BILI investors will want to tune in next month. Bilibili Inc. is set to release earnings on March 16th, 2021. During their last earnings release the company posted EPS of $-0.71.
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Glu Mobile Inc. (GLU) is a maker of free-to-play mobile games that are geared toward casual players. The small-cap company is worth just $1.5 billion, and it trades at less than three times 2021 sales estimates and 17 times forward earnings. With its own underappreciated individual strengths and the overall video game industry likely to enjoy sustained growth, Glu could blow past its current valuation even if it doesn’t manage to hit any home runs with new releases in the near future.
Thanks to the strength of core franchises, including Design Home, Covet Fashion, and MLB Tap Sports Baseball, management anticipates that bookings will grow between 8% and 10% this year without any contribution from new releases. The company also has four new games set to release in 2021, but the market has underestimated the sturdiness of Glu’s existing lineup. That creates an opportunity for investors.
In addition to new releases and content updates for its existing titles, Glu will likely be making some acquisitions moves in the near future. The company closed out the third quarter with $318 million in cash against zero debt, and management has indicated that it’s in the process of identifying outside development studios that can help push the company’s growth to the next level.
With shares trading at affordable multiples and diverse avenues for the company to outperform expectations, Glu Mobile looks like another buy in the gaming industry.
Founded in 1982, Electronic Arts (EA) has played a defining role in the progression of the interactive entertainment industry and is the U.S.’s second-largest video game company by revenue. The company has a leading position in the sports-game genre thanks to popular licensed franchises such as Madden NFL and FIFA, and it’s also got a stable of high-profile original properties including The Sims, Apex Legends, and Battlefield.
The global popularity of video games will likely continue to grow in coming decades, giving leading publishers opportunities to reach new players and expand sales in emerging geographic markets. EA’s dependable lineup of gaming franchises and experience developing and marketing titles that resonate with players should help it tap into that growth, and continued expansion for digital software distribution and the sale of virtual items should help boost sales and margins as well.
Zynga (ZNGA) is different from the other video game stocks on the list because 96% of its revenue is derived from mobile games. Moreover the company reported strong numbers in Q3 with the highest revenue and bookings in history.
Another important point to note here is that Zynga reported revenue of $133 million from international markets in Q3 2019. That figure increased to $191 million in 2020. With that kind of regional diversification, the company is positioned for growth in the coming quarters. Plus, it also has a “multi-year pipeline of new games” in store. This will help boost its revenue and cash flow growth.
Finally, from a financial perspective, Zynga has also been generating solid free cash flows, which gives it a lot of flexibility for aggressive growth. For instance, it recently acquired Rollic, a move that will help it enter the fast-growing “hyper-casual games” market.
ZNGA stock currently has a Buy rating form 16 analysts and an Overweight rating form two.
Overall, ZNGA stock looks attractive at its current levels. A possible breakout on the upside could be coming soon, with the stock in an extended consolidation range.
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