Due to the growing popularity of online gaming, the rise of esports, technological proliferation in software and hardware, and increasing Internet accessibility, the video gaming industry is well positioned to see significant long-term growth. Given the industry’s tailwinds, quality video gaming stocks Activision ( ATVI ), Electronic Arts ( EA ) and Nexters ( GDEV ) could be ideal buys this week. read more….
The video gaming industry is expected to witness significant growth in the coming years due to the growing preference for online gaming, growing popularity of esports, advances in technology to enhance real-time rendering of graphics, and the increasing availability of high-time. Global internet speed.
Given the bright growth prospects of the industry, investors may consider buying fundamentally sound video gaming stocks Activision Blizzard, Inc. (ATVI), Electronic Arts Inc. (EA), and Nexters Inc. (GDEV) this week.
Before diving deeper into the fundamentals of these stocks, let’s first discuss what’s going on in the gaming industry and why these video gaming stocks are worth investing in.
Due to the growing popularity of mobile and online gaming, the video gaming industry is an attractive market with solid growth potential. The rise of esports and game events and the increasing availability of high-speed Internet around the world. The advent of 5G technology will revolutionize the gaming landscape.
With 5G networks, cloud gaming platforms can deliver high-quality gaming experiences with low latency and fast load times. But, it can Include multiplayer games With (significantly more number of) concurrent players, without any gap or error.
Additionally, the gaming industry should benefit from the availability of top-of-the-line, next-generation gaming consoles, including the Xbox Series X and PS5, which provide users with a better gaming experience. Additionally, innovation and technological proliferation in both gaming software and hardware reflect promising growth prospects for the industry.
With the expansion of immersive technologies such as AI and VR&AR in games, the integration of high-quality graphics with sound effects enhances the gaming experience.
According to a report by Grand View ResearchThe global video game market is expected to reach $583.69 billion, which is a 12.9% CAGR. Investors’ interest in gaming stocks has been fueled by the Vaneck Vectors Gaming ETF (BJK) 16% gain in the last six months.
Let’s take a closer look at the fundamentals of the featured stocks:
Activision Blizzard, Inc. (ATVI)
ATVI develops and publishes interactive entertainment content and services in the Americas, Europe, Middle East, Africa and Asia Pacific. The company operates through three divisions: Activision; snowfall; and the king. Its main product franchises include Call of Duty, Diablo, Hearthstone, World of Warcraft, Overwatch League and Candy Crush.
On April 4, ATVI and Valve, LLC, a premier PC game developer, jointly announced a strategic partnership that grants Activision exclusive worldwide publishing rights for upcoming games developed by Valve. Under the agreement, ATVI acquired the publishing rights to Day of Defeat, a multiplayer game powered by Valve’s Half-Life technology.
The partnership will expand the company’s PC portfolio.
In terms of trailing-12-month gross profit margin, ATVI’s 70.43% is 41.5% higher than the industry average of 49.77%. The stock’s trailing-12-month EBIT margin of 24.41% is 199.9% higher than the industry average of 8.14%. Additionally, its 22.82% trailing-12-month net income margin is 675.7% higher than the industry average of 2.94%.
ATVI’s non-GAAP net income increased 34.8% year-over-year to $2.38 billion in the first quarter ended March 31, 2023. The company’s non-GAAP operating income increased 56.5% to $953 million from the prior-year period. Its non-GAAP net income grew 72.9% year-over-year to $866 million. Additionally, its non-GAAP EPS came in at $1.09, up 70.3% from the prior-year quarter.
The consensus revenue estimate for the fiscal year (ending December 2023) of $9.48 billion represents an 11.3% year-over-year improvement. Likewise, the consensus EPS estimate of $3.96 for the current year represents a year-over-year increase of 16.1%. Moreover, the company has beaten its consensus revenue estimates in all four trailing quarters, which is impressive.
Additionally, analysts expect ATVI’s revenue and EPS to grow 2% and 7.1% year-over-year to $9.67 billion and $4.24, respectively, for fiscal 2024. Over the past six months, the stock has gained 3.9% to close the last trading session at $77.04.
ATVI’s strong fundamentals are reflected in it POWR Ratings. The stock has an overall rating of B, which is Buy in our proprietary rating system. POWR Ratings evaluates stocks by 118 different factors, each with its own weight.
ATVI has a B grade for growth and quality. within the Entertainment – Toys and video games industry, it is ranked #7 among 22 stocks.
In addition to the POWR ratings I just published, you can see ATVI’s ratings for Stability, Value, Sentiment and Momentum. here.
Electronic Arts Inc. (EA)
EA develops, markets and distributes games, content and services for game consoles, PCs, mobile phones and tablets globally. It primarily develops games and services in various genres, including games under Battlefield, The Sims, Need for Speed, racing, action, role-playing and simulation, and licenses games from others such as Madden NFL, FIFA and Star Wars. brand.
On April 6, EA introduced EA SPORTS FC™, the interactive future of football. FC will be EV SPORTS’ platform to create, innovate and develop new football experiences, connecting millions of fans through console, mobile, online and esports products. The company can benefit significantly from this new brand.
On February 3, EA announced that EA SPORTS™ has signed a partnership with the two-time reigning Formula 1.® World Champion Max Verstappen. Under the agreement, Oracle Red Bull Racing Driver will collaborate with the brand to create content across the EA Sports portfolio. Also, EA SPORTS branding has been added to Verstappen’s 2023 season race helmet.
EA’s trailing-12-month gross profit margin of 75.87% is 52.4% higher than the industry average of 49.77%. Likewise, the stock’s trailing-12-month EBITDA and net income margins of 26.65% and 10.80% compare to respective industry averages of 17.85% and 2.94%.
In the fourth quarter ended March 31, 2023, EA’s net income rose 2.7% year-over-year to $1.87 billion. Its gross profit was $1.43 billion, up 1.4% year-over-year. Net bookings for the quarter were $1.95 billion, an increase of 11% year-over-year, and live services and other net bookings increased 9% to $1.62 billion from the prior-year period. Also, net cash provided by operating activities was $617 million.
Analysts expect revenue and EPS for the fiscal year (ending March 2024) to grow 3.1% and 5% year-over-year to $7.57 billion and $6.80, respectively. Moreover, the company has beaten its consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
Additionally, consensus revenue EPS estimates of $8.31 billion and $7.68 for fiscal 2025 represent a year-over-year improvement of 9.9% and 13.1%, respectively. Shares of EA have gained 4% over the past year to close the last trading session at $125.32.
EA’s POWR ratings reflect its solid outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
EA has a B grade for quality and sentiment. In the 22-stock Entertainment – Toys & Video Games industry, it is ranked #6.
In addition to what we have mentioned above, we also have EA’s ratings for Stability, Growth, Value and Momentum. Get all EA ratings here.
Nexters Inc. (GDEV)
GDEV operates as a game development company worldwide. It is headquartered in Limassol, Cyprus. The company develops desktop, mobile, web and social games.
GDEV’s trailing-12-month gross profit margin of 67.33% is 35.3% higher than the industry average of 35.27%. And the stock’s trailing 12-month EBITDA margin of 26.29% is 47.3% higher than the industry average of 17.85%. Also, its trailing-12-month net income margin of 20.49% is significantly higher than the industry average of 2.94%.
GDEV’s revenue rose 8% year-over-year to $125 million in the third quarter ended September 30, 2022. Its platform commissions rose 10% year-over-year, generally in line with revenue growth. Also, the company’s adjusted EBITDA totaled $55 million, up 292.9% year-over-year. Cash flow generated from operating activities was $60 million, representing an increase of 17% year-over-year.
Shares of GDEV have surged 104.3% over the past month and 33.2% over the past year to close the last trading session at $8.50.
GDEV’s POWR ratings reflect its promising outlook. The stock has an overall rating of B, which is Buy in our proprietary rating system.
GDEV has a B grade for quality, value and value. The stock also has B grade for quality. It ranks #4 out of 22 stocks in the same industry.
To receive additional ratings for GDEV’s growth, stability and momentum, Click here.
What to do next?
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ATVI shares traded down $77.04 (-100.00%) in premarket trading on Friday. Year-to-date, ATVI is up 0.64%, compared to an 8.18% gain in the benchmark S&P 500 index over the same period.
About the Author: Mangeet Kaur Bounce
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using his fundamental approach to analyzing stocks, Mangeet’s approach helps retail investors understand the underlying factors before making investment decisions.
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