Almost 60 million students who typically attend elementary, middle, and high school are home right now - and might be until September. Add in college students, and that number grows to 80 million. That's a quarter of the entire U.S. population who previously had somewhere to go all day now doing... nothing.
And there's one obvious spot they'll turn to: gaming.
Video games are winning the screen-time war right now. Gaming has been growing its share of consumers' attention and income for years, bringing in $120 billion in 2019. That's more than 10 times all movies combined at the box office in the United States, even with blockbuster hits like Avengers, Star Wars, and Frozen.
It's easy to think of video games as just a kid's toy, but the industry has matured with its audience and solidified its place in the consumer market. It's been pushing the limits of cutting-edge hardware and graphics. It's helped semiconductor companies like Intel Corp. (NASDAQ: INTC) and Advanced Micro Devices Inc. (NASDAQ: AMD) improve their product lines.
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Now more than ever, video games and interactive media are poised to explode. There's less competition and a captive audience stuck indoors nearly all day. This is a watershed for game makers, especially ones with the resources to capture this unprecedented increase in demand for entertainment.
An Industry with Staggering Growth
The chief technology officer for Verizon Communications Inc. (NYSE: VZ) said video game traffic was up a staggering 75% from March 8 to March 15. That's way more than the uptick video traffic saw at 12%. Nintendo Co. Ltd. (OTCMTKS: NTDOY), Microsoft Corp. (NASDAQ: MSFT), and Sony Corp. (NYSE: SNE) have all been struggling to keep up online gaming demand on their servers.
Video gaming is even being touted as a healthy activity. In a recent press release, the World Health Organization (WHO) went so far as to recommend playing video games, teaming up with representatives from the gaming industry to launch the #PlayApartTogether campaign.
Steam, a popular digital marketplace that offers a seemingly endless catalog of games for PCs, has shown concurrent usage breaking 20 million players. Cloudflare Inc. (NYSE: NET) a major content delivery network, has seen online gaming usage spike over 20% in parts of Italy and South Korea after their implementation of quarantine regulations.
And while there are dozens of big-name tech stocks in the space, this is the best one to buy today.
Just like video games outperformed the market during the financial crisis with the shift to digital sales and online gaming, this stock is set to weather the storm. In a matter of only a few months after the market crashed in 2009, it gained 50%, outperforming the S&P 500 by 40%.
This Is the Best Tech Stock to Buy in the Sector
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The stock I like the most right now is Activision Blizzard Inc. (NASDAQ: ATVI).
Activision is relatively insulated from COVID-19. It offers an affordable entertainment option for the millions of newly home-bound people.
The company was quick to seize its opportunity in the changing market conditions. It promptly released the remastered version of one of the most popular games of the previous decade, "Modern Warfare 2," and launched "Call of Duty: Warzone," which saw 30 million downloads within the first 10 days. As Activision's first entry into the battle royale genre, popularized by the monstrously successful Fortnite franchise, it is off to a strong start.
Consumers have flocked to the massive community of players, in part to socialize at a time when sharing physical space can be hazardous. Friends and strangers can share an activity and chat with each other from the safety and comfort of their own homes.
Game streaming, which has also been trending over the past few years as a part of Activision's business, has also just seen a huge boost.
With all major sports canceled or suspended until the crisis passes and 24-hour networks left with no new content, this programming gap has allowed e-sports to take more of the spotlight.
Last year, the juggernaut gaming franchise Fortnite pulled in over 2 million concurrent viewers, putting it on par with viewership from playoff competitions in major sports like tennis, the NHL, and the NBA. With millions of viewers watching the best in the world go head to head, Fortnite and other e-sports are in prime position to see those numbers and advertising revenue grow.
E-sports is already breaking out this year, with Fox's virtual NASCAR race setting a record with 1.3 million viewers.
Even established sports leagues are piling in to plug the sudden hole in ESPN's schedule. The NBA recently announced that its players would be facing off against one another in an NBA 2K tournament for ESPN. The event would include some of the league's biggest stars, with the winner picking a charity to receive $100,000 in support of coronavirus relief.
E-sports leagues are going digital in the wake of this pandemic, and this trend will likely hook viewers.
Activision is at the forefront of this trend, having launched its Overwatch League in 2018, the first city-based e-sports league and organizing dozens of events in the last few years.
They even managed to quickly pivot during the pandemic to online-only tournaments for both its Call of Duty and Overwatch League.
With Newzoo predicting that by 2021 there will be over 300 million casual viewers, e-sports is not going anywhere.
Thanks to multiple tailwinds, we could see Activision head back toward its 2018 highs in the $80 range, 40% higher than today.
Why Startups Can Have an Edge During a Recession
Uber, Airbnb, Slack, Pinterest, and Venmo have something big in common - something other than their big names.
These startups were founded during the last recession.
And now, some of the most iconic companies of our time could launch into Fortune 500s during days like today.