The novel coronavirus pandemic has proven disastrous for many industries. However, the pandemic has actually resulted in conditions that are even more favorable than usual for some. Take video games, for example. Companies like Electronic Arts (NASDAQ:EA) have performed very well, thanks to consumers who have been locked down and desperate for entertainment. EA stock has reflected that popularity, with gains of 26% so far this year.
Electronic Arts is on a growth path. It’s getting a boost from the pandemic, and stands to see a payday when all-new video game consoles are released this fall. In addition, while this A-Rated stock may not pay dividends, the company’s leadership is firmly committed to a strategy of repurchasing shares.
If you want to take advantage of the boom in video game stocks, EA stock is a good choice.
Key EA Gaming Franchises and the Lure of Sports
Electronic Arts is home to some of the video game industry’s biggest franchises. The list includes the Battlefield, The Sims, Star Wars Battlefront, Apex Legends, Titanfall and Need For Speed franchises. With new next-generation game consoles due this fall from Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE), EA is going to reap the rewards of gamers laying out cash for new titles from those franchises that take full advantage of their console’s graphics capabilities.
Electronic Arts is also an industry leader in sports titles. That domination through franchises like FIFA soccer, Madden football and NHL hockey pays off in a big way with yearly releases. Each new version has incremental improvements, but reflects the current year’s teams and players. For 2019, sales of these sports titles accounted for 32% of EA’s revenue.
Consider the situation in 2020 — and in all likelihood, into 2021. Professional sports leagues have been shut down. Sports channels like Disney’s (NYSE:DIS) ESPN have been reduced to replaying “classic” games to keep fans entertained. In fact, ESPN has taken the step of broadcasting professional athletes playing sports video games. Several leagues are planning mini seasons played in a controlled, locked-down environment. But the reality is, until there’s a proven coronavirus vaccine, professional sports will be unable to ramp back up to anything resembling normal.
If the drought of actual sports continues because of the coronavirus pandemic, EA’s already-lucrative professional sports franchises will be absolutely printing money. Games like Madden 21 could be the closest thing to a real-life, televised game that’s available for a long time.
How Has EA Performed?
Now flirting with $136, EA stock has performed well in 2020, with a gain of 26% so far. Over the past five years, EA shares are up 88%.
Activision Blizzard (NASDAQ:ATVI) has posted growth of nearly 35% in 2020, and 212% over the past five years. Take-Two Interactive (NASDAQ:TTWO) is up 21% for the year to date and 422% over the past two years. Meanwhile, mobile gaming giant Zynga (NASDAQ:ZYNGA) has seen its shares gain 60% so far in 2020 and 271% over the past five years.
Put in that perspective, EA may not seem quite as impressive. However, the bigger picture is that gaming stocks in general are performing well. And as I wrote in my analysis of ATVI stock in June, the pandemic is an event that has only caused gaming stocks to flourish. Add in the already growing popularity of gaming in general — an industry big enough that Amazon (NASDAQ:AMZN) now sees it as a “billion dollar opportunity”– and a proven gaming company like Electronic Arts is a solid investment.
Bottom Line on EA Stock
I like the prospects for Electronic Arts. Events are lining up perfectly to support continued growth in EA stock — at least for the next few years. The pandemic has increased the popularity of video games in general. Its best-selling sports franchises like FIFA are set to benefit even more if professional sports continue to be disrupted by the coronavirus. And in the fall, a new cycle of game purchases will kick off with the launch of the next-generation PlayStation 5 and Xbox Series X.
Despite its performance so far in 2020, EA still has plenty of headroom before it touches the all-time high of $148.73 it closed at in July 2018. That makes it a safe choice for investors looking to take advantage of the surge in popularity of video games and video game stocks.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.