The video game industry has been one of the major beneficiaries of the COVID-19 pandemic. Revenues for many companies and platforms in the sector have increased over the last few quarters as gaming has become one of the key entertainment outlets for people forced to stay at home.
According to Mordor Intelligence, the global gaming market is expected to grow at a CAGR of 10.5% over the next six years to hit $295.63 billion in sales by 2026.
Activision Blizzard, Inc. (ATVI)
Based in Santa Monica, CA, ATVI is a leading interactive entertainment company that develops and distributes content suitable for video gaming consoles, personal computers (PC), and mobile devices through retail and digital channels. The company’s primary franchises include Call of Duty, Crash Bandicoot, World of Warcraft, Diablo, StarCraft, Candy Crush, Bubble Witch, and Farm Heroes.
In December, ATVI’s World of Warcraft: Shadowlands became the fastest-selling PC game of all time, selling more than 3.7 million units globally on its first day. ATVI’s iconic Call of Duty series has set a new franchise record by surpassing more than $3 billion in net bookings over the last 12 months, with key performance metrics across engagement and premium game sales at all-time highs.
ATVI has largely benefited from its dominant market position and growing global user base. The company’s net revenues have increased 21.5% year-over-year to $2.41 billion in the fourth quarter ended December 31, 2020. Its non-GAAP EPS has risen 22.6% from the year-ago value to $0.76, while its net bookings have grown 12.5% over the same period to $3.05 billion. Its overall Monthly Active Users (MAUs) were 397 million, slightly higher than the prior quarter.
Analysts expect ATVI’s revenues to rise 17.1% year-over-year to $1.78 billion in the current quarter ending March 31, 2021. A consensus EPS estimate of $0.70 for the current quarter represents a 20.7% improvement year-over-year. ATVI has an impressive earnings surprise history also; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 68.7% over the past year.
ATVI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
ATVI has a B grade for Sentiment, Quality and Momentum. In the 23-stock Entertainment – Toys & Video Games Industry, it is ranked #3.
In total, we rate ATVI on eight different levels. Beyond what we stated above, we have also given ATVI grades for Growth, Stability, and Value. Get all ATVI’s ratings here.
Take-Two Interactive Software, Inc. (TTWO)
Based in New York City, TTWO is a leading developer, publisher and marketer of interactive entertainment for consumers around the globe. The company develops and publishes products principally under Rockstar Games, 2K, Private Division, and Social Point labels. Its products are designed for console systems and personal computers, including smartphones and tablets, and are delivered through physical retail, digital download, online platforms and cloud streaming services.
In December, TTWO’s Rockstar Games announced the biggest update to its most famous gaming series, Grand Theft Auto Online. The company has also launched new versions of its NBA series and “Everything is game” franchise in November.
TTWO’s digital online revenues have increased 4% year-over-year to $728.51 million in the fiscal third quarter ended December 31, 2020. Its net income has risen 11.4% from the year-ago value to $182.25 million, yielding an EPS of $1.58, up 9.7% year-over-year.
A consensus EPS estimate of $5.96 for fiscal 2021 (ending March 31) represents a 12% rise year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. A consensus revenue estimate of $3.40 billion for the current year represents a 13.8% gain from the same period last year. The stock has gained 75.4% over the past year.
It’s no surprise that TTWO has an overall rating of B, which equates to Buy in our POWR Ratings system. TTWO has a B grade or Value, Sentiment, Quality and Momentum. It is currently ranked #5 of 23 stocks in the Entertainment – Toys & Video Games industry.
Click here to see the additional POWR Ratings for TTWO (Stability and Growth).
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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ATVI shares rose $0.29 (+0.28%) in after-hours trading Friday. Year-to-date, ATVI has gained 11.80%, versus a 5.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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