Forget Skillz, Buy These 3 Video Game Stocks Instead

NASDAQ: EA | Electronic Arts Inc. News, Ratings, and Charts

EA – The video game industry continues to grow—owing to highly engaging content and continued innovations—despite peoples’ return to outdoor activities with the reopening of the economy. But we think Skillz (SKLZ) looks overvalued at its current price level. Therefore, investors should instead bet on shares of fundamentally sound video game companies Electronic Arts (EA), Playtika (PLTK), and DoubleDown Interactive (DDI) to cash in on the industry tailwinds. Let’s discuss.

San Francisco-based Skillz Inc. (SKLZ) enables game developers to monetize their content through fun and fair multiplayer competition. Its revenue increased 70.2% year-over-year to $102.07 million in its third quarter (ended September 30, 2021), but its total costs and expenses increased 107.5% year-over-year to $183.72 million. Furthermore,  its loss from operations came in at $81.64 million, versus $28.56 million in the year-ago period. Along with the company’s weak financials, its 0.67% trailing-12-month CAPEX/Sales ratio is lower than the 3.82% industry average. In addition, its trailing-12-month EBITDA and net income margins are currently negative.

The stock has lost 26.8% in price over the past six months to close Friday’s trading session at $11.33. And on October 23, 2021, Kaskela Law LLC announced that it would investigate SKLZ on behalf of the company’s stockholders based on an amended securities fraud complaint. But despite the financial weakness, in terms of forward EV/S ratio, the stock’s 10.48x is 318.4% higher than the 2.50x industry average. In addition, its 11.87x forward P/S is 584.8% higher than the 1.73x industry average. So, we think it is wise to avoid the stock now.

However, the video-gaming industry is poised for solid growth thanks to the introduction of engaging content and continued innovations. According to a Mordor Intelligence report, the global gaming market is estimated to grow at a 9.6% CAGR through 2026. Therefore, we think investors looking to benefit from the industry’s growth should  instead bet on quality video gaming stocks Electronic Arts Inc. (EA), Playtika Holding Corp. (PLTK), and DoubleDown Interactive Co., Ltd. (DDI).

Click here to check out our Video Game Industry Report for 2021

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.

On September 29, EA and Fédération Internationale de Football Association (FIFA) announced a new EA SPORTS FIFA 22 esports program, which is expected to attract millions of players and viewers. Brent Koning, VP, EA SPORTS Competitive Gaming, said, “FIFA possesses the pivotal platform for football fans around the world to insert themselves into their own sports story. In partnership with FIFA, the mainstream appeal of esports is evident.”

EA’s net revenue increased 58.6% year-over-year to $1.83 billion for the fiscal second quarter ended September 30, 2021. Its gross profit increased 54% year-over-year to $1.33 billion. Also, its operating income came in at $340 million, up 128.2% year-over-year.

For its fiscal year 2022, EA’s revenue and EPS are expected to grow 24% and 16.9% respectively year-over-year to $7.67 billion and $6.72.In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 8.8% in price to close Friday’s trading session at $139.57.

EA’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. The stock has an overall B rating, which equates to Buy in our proprietary rating system.

In addition, it has an A grade for Sentiment, and a B grade for Value and Quality. EA is ranked #3 of 23 stocks in the Entertainment – Toys & Video Games industry. Click here to see the additional POWR Ratings for EA (Momentum, Growth, and Stability).

Playtika Holding Corp. (PLTK)

Headquartered in Herzliya Pituarch, Israel, PLTK develops mobile games in the United States, Europe, the Middle East, Africa, the Asia Pacific, and internationally. The company owns a portfolio of casual and casino-themed games.

On October 11, 2021, PLTK’s game studio Wooga launched Switchcraft, a narrative-based match-3 game. Nai Chang, managing director at Wooga in Berlin, said, “In the last four years, we’ve changed our company vision to really focus on story-driven casual games. In my mind this is what sets us apart from all other games in the genre. Our focus on the story is clear when you first start playing. The amount of narrative world building and immersion is what Switchcraft brings for mobile games.”

For the third quarter, ended September 30, 2021, PLTK’s revenues increased 3.7% year-over-year to $635.90 million. The company’s total assets came in at $2.73 billion for the period ended September 30, 2021, compared to $1.78 billion for the period ended December 31, 2020. Its cash and cash equivalents were  $894.10 million, compared to $520.10 million for the same period.

PLTK’s revenue is expected to be t $2.87 billion in its fiscal year 2022, representing a 10.7% year-over-year rise. In addition, the company’s EPS is expected to increase 195.8% year-over-year to $0.71 in the current year. It closed Friday’s trading session at $23.53 and is currently trading 12.7% higher than its 52-week low of $20.88, which it hit on August 3, 2021.

It is no surprise that PLTK has an overall B rating, which equates to Buy in our POWR Rating system. The stock has a B grade for Value and Quality.

PLTK is ranked #5 in the  Entertainment – Toys & Video Games industry. Click here to see the additional POWR Ratings for PLTK (Stability, Momentum, Growth, and Sentiment).

DoubleDown Interactive Co., Ltd. (DDI)

Based in South Korea, DDI  develops and publishes digital games on mobile and web-based platforms in South Korea. Its products include DoubleDown Casino, DoubleDown Classic, DoubleDown Fort Knox, and Ellen’s Road to Riches games.

On September 14, 2021, DDI launched Undead World: Hero Survival, a zombie apocalypse RPG that uses a mixture of idle gameplay and character collecting and upgrading. In Keuk Kim, CEO of DoubleDown, said, “We’re excited to be expanding DoubleDown’s repertoire, developing mobile games in new genres.”

On August 25, 2021, DDI announced the commencement of an initial public offering of its shares in the form of American depositary shares in the United States. The estimated price range per ADS was $18 – $20.

Analysts expect DDI’s revenue and EPS to increase 6.8% and 12.7%, respectively,  year-over-year to $395.73 million and $1.60, in its fiscal year 2022. It closed Friday’s trading session at $16.23 and is currently trading 5.4% higher than its 52-week low of $15.40, which it hit on September 8, 2021.

DDI’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.

DDI has an A grade for Value and Sentiment, and a B grade for Quality. Within the Entertainment – Toys & Video Games  industry, it is ranked #1. Click here to see the additional POWR Ratings for Growth, Momentum, and Stability for DDI.

Click here to check out our Video Game Industry Report for 2021


EA shares were trading at $138.79 per share on Monday afternoon, down $0.78 (-0.56%). Year-to-date, EA has declined -3.00%, versus a 26.50% 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. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
EAGet RatingGet RatingGet Rating
PLTKGet RatingGet RatingGet Rating
DDIGet RatingGet RatingGet Rating
SKLZGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Stock Market “Nausea Index” Going Off

The stock market (SPY) has seen fresh lows this week scaring many investors into selling their positions. On the other hand, 40 year investment veteran shares a proprietary market indicator that points to a significant bounce coming soon. Is he right? You be the judge by reading below.

:  |  News, Ratings, and Charts

3 Stocks that Are Thriving in an Inflationary Environment

Inflation is one of the biggest threats facing the economy. One profitable strategy during this period of high inflation is to focus on stocks that have pricing power, as these companies’ margins will continue to expand. In contrast, stocks without pricing power are likely to underperform as margin compression erodes EPS. Therefore, investors should consider buying these 3 stocks that are thriving in this inflationary environment: Olin (OLN), Nucor (NUE), and Chemours (CC).

:  |  News, Ratings, and Charts

Is the Bear Market Here?

We are witnessing the nastiest stock market (SPY) correction since Covid first came on the scene. That has some pondering if the next bear market is upon us. 40 year veteran investor Steve Reitmeister gives his clear eyed view on the market outlook and trading plan in this timely commentary. Get the full story below...

:  |  News, Ratings, and Charts

4 Best Value Stocks to Buy in January

In times of high inflation, value stocks tend to outperform growth stocks and have done so over the past year. Amid the rising inflationary pressure and looming interest rate hikes, fundamentally sound value stocks ArcelorMittal (MT), Covestro (COVTY), KT Corporation (KT), and Nature’s Sunshine (NATR) could be solid bets.

:  |  News, Ratings, and Charts

Is the Bear Market Here?

We are witnessing the nastiest stock market (SPY) correction since Covid first came on the scene. That has some pondering if the next bear market is upon us. 40 year veteran investor Steve Reitmeister gives his clear eyed view on the market outlook and trading plan in this timely commentary. Get the full story below...

Read More Stories

More Electronic Arts Inc. (EA) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All EA News