2 Video Game Stocks to Buy and Hold The video game industry suffered a setback with the reopening of the economy this year, but it is expected to continue to grow on the integration of advanced technologies and...
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The video game industry suffered a setback with the reopening of the economy this year, but it is expected to continue to grow on the integration of advanced technologies and innovations. So, we think it could be wise to bet on fundamentally sound video game stocks Activision Blizzard (ATVI) and Electronic Arts (EA). Let's discuss.
The demand for video games soared amid the pandemic as people spent most of their time at home. However, the gradual reopening of the economy and an ongoing semiconductor shortage have hampered the industry's growth this year.
With video games becoming more immersive and advanced, thanks to continuing innovations in virtual reality (VR) and augmented reality (AR), the industry is expected to continue growing in the post-pandemic environment. According to a techjury report, the video game industry is expected to reach $100.56 billion by 2024.
Activision Blizzard, Inc. (ATVI) and Electronic Arts Inc. (EA) are well-positioned to capitalize on the industry tailwinds. So, we think it could be wise to buy and hold these stocks.
Click here to check out our Video Game Industry Report for 2021
Activision Blizzard, Inc. (ATVI)
ATVI in Santa Monica, Calif., together with its subsidiaries, develops and publishes interactive entertainment content and services worldwide. The company operates through three segments: Activision Publishing, Inc.; Blizzard Entertainment, Inc.; and King Digital Entertainment.
On September 23, 2021, Jen O'Neal, the co-leader of Blizzard Entertainment, said, "Diablo II: Resurrected will introduce one of our most beloved games to all-new audiences. It was an honor for Vicarious Visions to join Blizzard and form the team that brought this classic back to life. Everyone involved was driven by a commitment to do right by the players, and I'm hugely proud of what they've accomplished."
ATVI's total net revenues increased 18.8% year-over-year to $2.30 billion in the second quarter, ended June 30, 2021. Its operating income came in at $959 million, up 28% year-over-year. While its net income increased 51% year-over-year to $876 million, its EPS came in at $1.12, up 49.3% year-over-year.
Analysts expect ATVI's revenue and EPS to increase 12.7% and 14.4%, respectively, year-over-year to $9.93 billion and $4.38 in its fiscal year 2022. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters.
ATVI's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
ATVI has a B grade for Value, Sentiment, and Quality. In the Entertainment - Toys & Video Games industry, it is ranked #8 of 24 stocks. Click here to see the additional POWR Ratings for Momentum, Growth, and Stability for ATVI.
Electronic Arts Inc. (EA)
A global leader in digital interactive entertainment, EA develops, markets, publishes and distributes games, content, and services for game consoles, PCs, mobile phones, and tablets worldwide. It has more than 450 million registered players around the world. EA is headquartered in Redwood City, Calif.
On August 4, 2021, Andrew Wilson, EACEO, said, "Our new launches, leading games, and live services all had an outstanding quarter. With our expanding EA SPORTS portfolio, more amazing experiences in Apex Legends, the ground-breaking new Battlefield 2042, and our leading live services, including mobile, we're set to deliver greater games and content to players this year."
EA's total net revenue increased 6.3% year-over-year to $1.55 billion for its fiscal year 2022 first quarter, ended June 30, 2021. Its life services and other revenue increased 11.7% year-over-year to $1.23 million. Also, its gross profit came in at $1.24 billion, up 5.6% year-over-year. Its total liabilities were $5.01 billion for the period ended June 30, 2021, compared to $5.45 billion for the period ended December 31, 2020.
For its fiscal 2022, EA's revenue and EPS are expected to grow 22.4% and 15.3%, respectively, year-over-year to $7.58 billion and $6.63 In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters.
EA's strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
In addition, it has a B grade for Value, Sentiment, and Quality. EA is ranked #5 in the same industry. Click here to see the additional POWR Ratings for EA (Momentum, Growth, and Stability).
Click here to check out our Video Game Industry Report for 2021
ATVI shares were trading at $76.54 per share on Friday morning, up $0.43 (+0.56%). Year-to-date, ATVI has declined -17.17%, versus a 20.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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