The lockdowns that came along with the novel coronavirus outbreak have been a boon for some businesses and a disaster for others. One of the industries that has benefited most from people being locked up in the homes has been gaming. Gaming stocks climbed steadily over the past few months, but now that people are out an about again, there’s some question as to whether the sector is overhyped.
While it’s true that lockdown helped gaming gain traction, it may not be a temporary boost. Instead, the pandemic simply may have accelerated an already growing trend. Long-term, the gaming space appears to have a long growth runway. The industry is expected to grow at a compound annual growth rate of 9.2% over the next five years.
In the shorter term, the threat of a second wave of the pandemic coupled with a slow return to normalcy for professional sports could cause people to spend more time using video game consoles.
With that in mind, it’s important to choose a gaming stock that isn’t overhyped coronavirus play. Instead, gaming stocks with plenty of growth in the tank post-pandemic are a good way to capitalize on a potential second wave while still protecting your long-term portfolio.
Gaming Stocks to Buy: Electronic Arts (EA)
One of the biggest and best names among gaming stocks is Electronic Arts. EA stock is currently trading near all-time as it approaches the release date for the next installment of its hugely popular NFL game, Madden 21.
As InvestorPlace’s Chris Markoch pointed out last week, it’s a great time to pick up EA stock because the game’s release will likely boost the stock as the firm racks up new users.
Plus, the Madden franchise is a great replacement for traditional sports, if it comes to that. U.S. sports are going to operate on a limited basis for some time, and Madden is able to fill that void. Players not only engage in the game, but sportsmen themselves often discuss their game ratings on social media. Madden has gotten so popular that ESPN even discusses the game during a prime-time segment.
The bottom line, EA stock isn’t an overinflated gaming stock. It’s a quality investment with plenty of growth on the horizon, so it makes sense to buy it.
Glu Mobile (GLUU)
Video game stocks aren’t limited to traditional game makers only. Mobile gaming is another segment that has experienced stellar growth during the pandemic as people fill their days toying with their smartphones. Like with traditional video games, the mobile gaming space was already growing rapidly— the lockdown seems to have accelerated that trend. Mobile gaming is expected to grow even faster than video games over the next few years, at a compounded annual growth rate of 13.3%.
GLUU stock is, in my opinion, one of the best ways to play that growing market. The firm is run by the former Senior Vice President of Electronic Arts’ mobile division, Nick Earl. Earl has been working to develop a solid product portfolio for Glu and so far he’s been successful.
The firm’s existing games like Kim Kardashian: Hollywood and Design Home were responsible for stellar Q1 results, a trend that will likely continue in the second quarter. Glu’s pipeline of upcoming games looks solid as well. The firm has been hoarding cash recently, which suggests it might be planning strategic acquisitions in the near future.
Mobile gaming is a competitive space, and Glu has yet to find solid footing which could lead to some near-term volatility. However, looking further into the future GLUU stock looks like a solid bet.
Penn National (PENN)
Penn National is largely a casino and racetrack operator, but it makes this video game stocks list because its online gambling presences is what makes the firm a compelling play. Online gambling has only just started to gain traction in the US, with sports betting being of particular interest to investors. PENN certainly isn’t the biggest player in the space, but its partnership with Barstool Sports should help draw attention to the firm.
Roughly half of the states that Penn national operates in have legalized sports betting, and you can assume that many more will follow suit as governments look for ways to pay their massive pandemic-inflated bills. Of course, for sports betting to gain traction sports will need to resume their normal schedules, but that makes PENN stock a good play for a return to normalcy.
Laura Hoy has a finance degree from Duquesne University and has been writing about financial markets for the past eight years. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN. As of this writing, she did not hold a position in any of the aforementioned securities.
