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Video gaming got an unexpected catalyst in 2020 thanks to the pandemic, and it's not going to slow down from here.
That has investors eyeing video game stocks like Activision Blizzard Inc. (NASDAQ: ATVI) and Electronic Arts Inc. (NASDAQ: EA) as ways to profit from this growing trend.
As millions of Americans were locked down because of the coronavirus, people turned to gaming as a way to pass the time. Esports leagues have been growing and only got bigger as live sports were delayed or cancelled. And just in time, a new wave of consoles made it to retail store shelves.
Like so many other changes in our lives caused by the pandemic, video games are not going to go backward. In fact, most experts think the industry will continue to grow at a high rate for years.
New developments like 5G and virtual reality will allow game designers to push the edge and design games that draw even more players to the industry. Fortunes will be made by those who invest in the industry leaders and innovators today and hold on for the wildly profitable ride coming.
The two largest pure-play video game companies in the United States right now are Activision Blizzard and Electronic Arts, and investors are right to be targeting these companies. They are essentially pick-and-shovel plays for the whole industry. Both have catalogs of massive hits and are constantly working to develop new ones.
Both are making smart acquisitions that will keep them at the forefront of the video gaming revolution for a long time.
But one stock stands out as the best gaming stock to own...
Why Activision Blizzard Stock Nudges Ahead of EA Stock
Electronic Arts has some of the biggest games in the industry. It owns games with huge audiences like Battlefield, FIFA Soccer, Madden NFL Football, and Apex Legends. These games are staples with new versions created routinely - at least annually in the case of the sports games.
The numbers are staggering. The FIFA Soccer game has had 100 million players.
Apex Legends has over 100 million as well, with 12 million of these active on a weekly basis.
A PORTFOLIO "GOLD MINE"
Our chief investment strategist says 2021 could be a gold mine for Americans - and these 5 stocks are "screaming buys."
A PORTFOLIO "GOLD MINE"
Our chief investment strategist says 2021 could be a gold mine for Americans - and these 5 stocks are "screaming buys."
The Madden NFL game has more than 10 million regular users.
In 2022, Electronic Arts is releasing its new golf game that will be the only game that allows players to play The Masters Tournament, PGA Championship, U.S. Open Championship, and The Open Championship, the PGA Tour's four major championships.
It is also expecting to release the newest version of the Battlefield franchise, a combat fighting game known for its online multiplayer contests.
It also has the Star Wars franchise now and will be releasing the latest game, titled Star Wars Battlefront, later this year.
Altogether, the company does almost $40 billion in revenue and is expected to grow earnings by 24% over the next five years.
Activision Blizzard also has a catalog of monster hits. Its offerings include War of Warcraft, Diablo 3, StarCraft, and even Call of Duty. It also owns King Gaming, the developer of the wildly profitable Candy Crush series of mobile games.
Its mega-hit, Call of Duty, has over 100 million monthly users and generated over $3 billion in revenue last year.
World of Warcraft has more than 5 million monthly users and is one of the largest grossing video games of all time.
The esports leagues focusing on Call of Duty and Overwatch have continued to perform well.
At King Gaming, revenue grew by 22% last year, reaching over $2 billion last year.
To continue delivering top-selling content, Activision intends to hire 2,000 developers over the next two years.
Activision Blizzard has had revenue of almost $80 billion over the last year. It isn't done growing, and analysts expect the company to increase profits by more than 15% annually for the next five years.
Technically, the two stocks look pretty much the same. The recent round of profit-taking has pushed both stocks below their 50-day moving average, and they are nearing significant support of the 200-day moving average.
Ideally, we would suggest buying both Activision and EA stocks to take advantage of the growth wave that is expected for video game companies over the next decade.
If all things were equal and we had to pick just one, it would be Electronic Arts as the smaller company with higher expected revenue growth. If that were your choice, it would be hard to find fault with your decision.
However, all things are not equal. As the stock has pulled back in recent weeks, we have seen insiders buying Activision Blizzard stock, particularly by insider Peter Nola. Mr. Nolan is an advisor to a leading private equity firm, Leonard Green and Partners, and is the firm's former managing partner.
When a director who has a successful track record as an investor and business owner is buying the stock, we have to give that company the edge.
Activision Blizzard stock is our pick if you can only choose one.
Three Stocks Even Better Than ATVI
Chief Investment Strategist Shah Gilani just held his first-ever stock-picking lightning round event - running through more than 50 stocks to tell you if they are stocks to buy or stocks to sell.
Dozens are overpriced and overhyped - you should ditch them ASAP.
But Shah says THESE three stocks are "screaming buys."
All three are trading at a discount... they're under-the-radar companies most people haven't even heard of... and they have massive tailwinds ready to send their share prices into the stratosphere.
To get the company names, tickers, and price targets for Shah's picks, go here now.
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