While the major indices have made significant progress since hitting a bottom earlier this year, individual names have mostly seen red ink. However, a small group of so-called novel coronavirus stocks have flourished, including Electronic Arts (NASDAQ:EA). These investments have enjoyed benefits from the Covid-19 disruption. With millions forced into their homes for weeks on end, it was no wonder that EA stock recovered from its initial bout of volatility and then some.
Essentially, Electronic Arts had a hostage audience. As you know, all forms of popular, communal entertainment were shuttered. Therefore, people could not watch a ball game or go to the movies. Worse yet, with these events shut down, people couldn’t get their entertainment fix at home. Their only option at that point was to engage content that was originally geared toward home consumption.
But the question regarding coronavirus stocks has always been about conversion after the pandemic fades away. While different industries vary, for video games, the future is bright, if not brighter. Prior to this crisis, experts forecasted that the gaming industry will generate $196 billion in revenue. After this awful mess, that number could rise appreciably, bolstering the case for EA stock.
We only need to look at the meteoric rise of Netflix (NASDAQ:NFLX) to have confidence in this projection. In its first quarter of 2020, the streaming giant added a remarkable 16 million subscribers. Today, it has 183 million subs worldwide.
In the new normal, Netflix should be able to maintain most of these gains. Relative to traditional options, content streaming is cheap. This cost-effectiveness also lifts EA stock. However, Electronic Arts also has another ace up its sleeve.
No Sports? No Problem for EA Stock.
As I alluded earlier, one of the biggest impacts to our society has been the lack of live sports. With various leagues shutting down, Americans could not rely on rooting for their favorite teams to help them overcome the forced quarantines. Therefore, the profile of EA stock went up as people found other coping mechanisms.
But as the nation starts to open its economy, the prospect for the return of sports has many fans excited. Soon, insiders expect Major League Baseball will provide a return-to-play proposal to the MLB Players Association. Many details will need to be worked out. But one thing is clear: there will be no fans in the stadiums, given the high risk of reinfection.
Even before this proposal turned serious, many sports writers did not like the idea of returning to the game in such a severely mitigated fashion. In fact, Mac Engel of the Fort Worth Star-Telegram labeled the concept “stupid.”
I know many sports fans agree. Having fans at the games is a core component of the sport itself. Can you imagine the rivalry between the New York Yankees and the Boston Red Sox without fans? It’s really a practice match at that point.
Further, the quality of the game is detrimentally impacted without rocking and rolling stadiums. Even on a televised broadcast, the excitement of those cheering (or jeering) in the stands is palpable.
And this brings me to EA stock. As you know, the underlying company owns the EA Sports brand, which features official licenses from major sports leagues. I don’t think it’s a stretch to assume that between a dumbed-down version of a ball game or the digital equivalent that players can control, they’ll pick the latter.
Electronic Arts Is Better Suited for the New Normal
While it’s tempting to blame the coronavirus for the disruption of live sports, this has been a trend — actually, a megatrend — that has been brewing for a long time. What the pandemic did is merely accelerate the trajectory.
As my longtime readers know, I’m big on demographic trends. If you follow the demo, you’ll often follow your investments to incredible profitability. As it relates to EA stock, I’m bullish because Electronic Arts has always been aligned with social distancing.
Thanks to the incredible popularity of esports, players from around the world can compete in robust, entertaining competitions. And they’re drawing in millions of fans as Generation Z is truly the first all-digital generation. In the future, digital sports, not live competitions will dominate.
And let’s not pretend that the coronavirus killed interest in live sports. Younger Americans have increasingly shifted away from traditional sporting interests. If we’re being truly honest, some teams appeared to be practicing social distancing long before the coronavirus became a thing.
Ultimately, you’re going to want to build a strong, long-term position in EA stock. It checks every box of relevancy. And the pandemic only serves to buttress this thesis.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.