Video Game Stocks To Buy And Watch Including Esports Stocks By Investors Business Daily
Video games are seeing a big surge in usage during the Covid-19 coronavirus pandemic as consumers stay at home. That’s raised interest in video game stocks, including esports stocks.
For investors, the video game market is divided into the “pure play” stocks of game publishers and the stocks of tech firms that have varying exposure to the industry.
The former includes video game stocks such as U.S. publishers Activision Blizzard (ATVI), Electronic Arts (EA) and Take-Two Interactive Software (TTWO). Other major stocks in the group include Japan’s Nintendo (NTDOY) and China’s NetEase (NTES).
The latter group includes consumer electronics giant Apple (AAPL), software leader Microsoft (MSFT) and Google parent Alphabet (GOOGL).
Video games have soaked up a larger portion of consumer time in recent years thanks to the growth of mobile games and multiplayer online games.
Massive Changes In Video Game Industry
In 2019, video game sales totaled $148.8 billion worldwide, rising 7.2% from the prior year, according to research firm Newzoo. North America accounted for 26% of that revenue, or $38.4 billion. Sales in North America rose 8.3% year over year, Newzoo said.
Newzoo estimates that the global video game market will generate $159.3 billion in revenue in 2020.
The video game industry is undergoing profound changes in technology and business models. On the technology front, video games have shifted from packaged media to digital downloads and cloud-based streaming. On the business side, microtransactions, subscriptions and esports are an increasing part of the sales mix.
The popularity of free-to-play games, such as Epic Games’ hit title “Fortnite” from the battle royale genre, have brought more gamers into the market.
What Are The Best Video Game Stocks?
Investor’s Business Daily’s Computer Software-Gaming industry group features 13 video game stocks. The group currently ranks No. 16 out of 197 industry groups tracked by IBD.
According to the IBD Stock Checkup, three video game stocks are tied for first place. NetEase, SciPlay (SCPL) and Take-Two each have an IBD Composite Rating of 97. That means they have outperformed 97% of stocks in key technical and fundamental metrics over the past 12 months. The best growth stocks have a Composite Rating of 90 or better.
IBD’s video game stocks group only lists companies that are traded in the U.S. So, it doesn’t include some major players like France-based Ubisoft and Japan’s Square Enix.
Other companies with diversified operations that include games, such as Microsoft, Sony (SNE) and Tencent (TCEHY), are in other groups.
Upcoming Catalysts For Companies
The video game industry encompasses games for living-room consoles and personal computers as well as smartphones and tablets.
The largest segment is smartphone games at 37% of 2019 video game revenue, Newzoo says. Console games are second with 30% share, followed by PC games at 24%.
Console game sales now benefit from the sweet spot of the hardware cycle. As the installed base of current-generation consoles peaks, publishers have a large market into which to sell games.
But next-generation consoles are due out this holiday season from Microsoft and Sony. Microsoft is coming out with its Xbox Series X console. Sony is readying its PlayStation 5 machine.
The new consoles were supposed to be a major focus of this year’s E3 video game conference in Los Angeles. But organizers canceled the 2020 show because of the coronavirus pandemic. Microsoft and others instead are holding online events to promote their latest game hardware and software.
Which Video Game Stocks Are Esports Stocks?
Many companies are making a play in the burgeoning esports market. Esports are professional sports competitions for video gamers.
Tencent holds “League of Legends” competitions. Activision Blizzard has competitive leagues for its “Overwatch” and “Call of Duty” games. Take-Two has set up an esports league around its “NBA 2K” sports title.
Last year, esports revenue totaled $1.1 billion, up 26.7% year over year, Newzoo says. Revenue came from sponsorships, media rights, advertising, game publisher fees, merchandise and ticket sales.
Advertisers are interested in esports for the games’ large and growing audience of hard-to-reach millennials. Newzoo estimates the global audience for esports in 2019 was 443 million, up 12.3% from the prior year. It sees that number rising 11.7% to 495 million in 2020.
Pure-play esports stocks include Allied Esports Entertainment (AESE), Esports Entertainment Group (GMBL) and Super League Gaming (SLGG). However, the three companies are unprofitable and unproven entities. None come close to meeting IBD’s CAN SLIM investing criteria.
Are There ETFs For Video Game And Esports Stocks?
Several exchange-traded funds invest in video game stocks and related equities.
Wedbush ETFMG Video Game Tech ETF (GAMR) was the first ETF to target the video game industry. It started in March 2016. Its top holdings are China’s DouYu International (DOYU) and Bilibili (BILI) and South Korea’s Webzen and Netmarble.
VanEck Vectors Video Gaming and eSports ETF (ESPO) commenced in October 2018. Its top holdings are Tencent and graphics-chip makers Nvidia (NVDA) and Advanced Micro Devices (AMD). It also has sizable stakes in Nintendo and Activision.
Roundhill Bitkraft Esports & Digital Entertainment ETF (NERD) started in June 2019. Its top holdings are DouYu, Tencent, China’s Huya (HUYA) and Sweden’s Modern Times Group. It also has large stakes in video game stocks Activision and Ubisoft.
Are Any Video Game Stocks A Buy Right Now?
Several video game stocks hit buy points recently during the stock market recovery following the coronavirus-driven crash.
Nintendo stock is in the 5% buy zone of its June 17 breakout, as of July 8, according to IBD MarketSmith charts. Activision stock also is in the buy zone of a recent breakout.
Take-Two stock has formed a cup base with a buy point of 149.38, according to MarketSmith charts. Meanwhile, EA stock is nearing the 20%-to-25% profit-taking zone of its latest breakout.
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