The gaming industry is expected to grow significantly in the foreseeable future, owing to the release of high-budget games, improved internet access, adoption of advanced technologies, and increased popularity of multiplayer and mobile games. Therefore, it could be a good time to invest in quality gaming stocks, Playtika Holding Corp. (PLTK), SciPlay Corporation (SCPL), and JAKKS Pacific, Inc. (JAKK).
Following a lackluster 2022, the gaming industry is expected to experience a rapid expansion, thanks to the release of high-budget games and next-gen consoles. Moreover, with the easing supply chain issues this year, updated gaming consoles are anticipated to be more widely distributed to households than ever.
The continued expansion of internet accessibility and rising demand for e-sports and game events, combined with the increasing number of casual and professional gamers, should boost the industry’s growth. Furthermore, the integration of high-quality graphics, sound effects, and immersive technologies like AR&VR in games is enhancing their appeal.
According to a report by Fortune Business Insights, the global video games market is projected to grow at a CAGR of 6.3% to reach $307.19 billion by 2029.
Investors’ interest in the gaming industry is evident from the VanEck Vectors Gaming ETF’s (BJK) 17.3% gains over the past six months. Given the industry’s bright prospects, gaming stocks PLTK, SCPL, and JAKK could make ideal investments in 2023.
Playtika Holding Corp. (PLTK)
Headquartered in Herzliya Pituach, Israel, PLTK develops mobile games on a global scale. The company’s portfolio includes casual and casino-themed games. It distributes its games to end users via numerous web and mobile platforms and direct-to-consumer channels.
On January 19, 2023, PLTK reported that it submitted a revised proposal to the board of directors of Rovio Entertainment Corporation to acquire Rovio for €9.05 ($9.70) per share in cash. The company believes that integrating the scale of Rovio’s user base and well-known IP with PLTK’s best-in-class monetization and game operations skills would create enormous value for PLTK’s shareholders.
On November 21, 2022, the company declared a $25 million minority investment in Ace Games, a Turkish mobile gaming company. This investment marks a significant step for PLTK’s new gaming investment strategy, which seeks cost-effective approaches to obtain a promising game intellectual property with high-growth potential.
PLTK’s income from operations grew 14.6% year-over-year to $128.30 million during the fourth quarter that ended December 31, 2022. Its income before income taxes rose 11% from the year-ago value to $91.90 million. Also, the company’s credit-adjusted EBITDA increased 15% year-over-year to $202.60 million, and its comprehensive income grew 3.9% from the prior year’s period to $106.40 million.
The consensus revenue estimate of $2.70 billion for the fiscal year ending December 2024 reflects a 4.3% year-over-year improvement. Likewise, the consensus EPS estimate of $0.91 for the same year indicates a 16.8% rise from the prior year. Shares of PLTK have gained 5.7% year-to-date to close the last trading session at $9.12.
PLTK’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Value and a B for Stability and Quality. In the 20-stock Entertainment – Toys & Video Games industry, it is ranked #2.
Beyond what we stated above, we also have PLTK’s ratings for Growth, Sentiment, and Momentum. Get all PLTK ratings here.
SciPlay Corporation (SCPL)
SCPL, a subsidiary of Scientific Games Corporation, develops, distributes, and manages a broad range of social gaming apps and websites. Along with casual gaming, it provides social casino games. It also offers titles and material from third-party licensed brands.
For the fiscal fourth quarter that ended December 31, 2022, SCPL’s total revenue increased 17.9% year-over-year to $181.10 million, while its operating income rose 264.6% from the year-ago value to $47.40 million. Also, the company’s adjusted EBITDA grew 23.8% from the prior year’s quarter to $58.7 million.
Furthermore, the company’s net income and EPS came in at $52.80 million and $0.32, a 332.8% and 255.6% improvement year-over-year.
Analysts expect SCPL’s revenue to increase 5.7% year-over-year to $709.23 million for the fiscal year ending December 2023. The company’s EPS for the ongoing year is expected to grow 22% from the previous year to $1.11. Moreover, SCPL surpassed its consensus revenue estimates in three of the trailing four quarters.
The stock has gained 38.9% over the past six months to close the last trading session at $15.99.
SCPL’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
SCPL has an A grade for Value and a B for Growth and Quality. It has topped the 20-stock Entertainment – Toys & Video Games industry.
In addition to the POWR Ratings I’ve just highlighted, you can see SCPL’s ratings for Stability, Sentiment, and Momentum here.
JAKKS Pacific, Inc. (JAKK)
JAKK manufactures and distributes toys, consumables, electronics, and related goods globally. Its segments include Toys/Consumer Products; and Costumes. The company sells its products via in-house sales professionals and independent sales representatives.
On February 13, 2023, JAKK disclosed more from the line of toys for the highly anticipated new film from Illumination and Nintendo, The Super Mario Bros. Movie. This is expected to increase customer satisfaction among fans of all ages. This move could also lead to an enhanced market position for JAKK and boost its sales and brand loyalty.
Furthermore, on January 31, the company debuted Ami AmisTM, a collectible world of knitted plush friends. This highly anticipated new line of collectibles is slated to include over 200 characters this year. “These characters are so unique, fans will quickly find their favorites to add to their collection,” said Tracy Warshauer, SVP of Marketing at JAKK.
For the fourth quarter that ended December 31, 2022, JAKK’s net income and EPS came in at $39.40 million and $3.79, compared to a loss and loss per share of $3.15 million and $0.37 in the prior year’s period, respectively. Also, as of December 31, 2022, the company’s cash and cash equivalents stood at $85.30 million, compared to $44.52 million as of December 31, 2021.
Analysts expect JAKK’s revenue to grow 4.2% year-over-year to $764.67 million for the fiscal year ending December 2024. The company’s EPS for the same year is expected to increase by 14.2% from the prior year to $4.67. Furthermore, JAKK surpassed its consensus revenue estimates in all four trailing quarters, which is impressive.
Shares of JAKK have marginally gained over the past year to close the last trading session at $14.82.
JAKK’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Growth and Quality. Within the same industry, it is ranked #3 of 20 stocks.
To see additional POWR Ratings for Stability, Sentiment, and Momentum for JAKK, click here.
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PLTK shares were trading at $9.31 per share on Monday afternoon, up $0.19 (+2.08%). Year-to-date, PLTK has gained 9.40%, versus a 1.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...
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