3 Ways to Trade the Hot Video Games Growth

video games - 3 Ways to Trade the Hot Video Games Growth

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There were fears sales of video games would pull back, post-pandemic.  However, that never happened. Instead, sales only grew stronger.

In September alone, the video game industry watched sales explode to $4.36 billion, according to the NPD Group. Additionally, in the first half of the year, sales were up to $28.9 billion, or 15% year-over-year (YOY) growth. And year-to-date (YTD) through September, sales are up to $42.3 billion, or 12% YOY growth. So much for fears of a slowdown.

Moreover, for full-year 2021, sales could hit $61.7 billion — a YOY increase of 10%.

Plus, with holiday shopping season just weeks away, and new video game releases coming, sales could remain blistering hot. Just in November, we’ll see Battlefield 2042, Call of Duty: Vanguard, Star Wars: Knights of Old Republic and Forza Horizon 5.

I don’t see much standing in the way of even better sales. That being said, some of the top video game stocks to consider include:

  • Activision Blizzard (NASDAQ:ATVI)
  • Take-Two Interactive (NASDAQ:TTWO)
  • Global X Video Games and eSports ETF (NASDAQ:HERO)

Now, let’s dive in and take a closer look at each one.

Hot Video Games Stock: Activsion Blizzard (ATVI)

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Since the beginning of the year, Activision Blizzard plummeted from a high of about $100 to now being just under $80.

Not helping, the California department of fair employment and housing filed a suit against the company for the mistreatment of its female employees. The company would go on to settle for about $18 million. Such treatment of anyone is reprehensible and disgusting. So hopefully, the company has learned its lesson — and a very expensive one.

At the same time, it appears the ATVI has priced in a good deal of the chaos. After catching support dating back to early 2020, the gaming stock is just beginning to pivot higher. From a current price of $79.09, I’d like to see ATVI stock re-test $100, near-term. We’ll also get a better idea of direction when the company posts its third-quarter results on Nov. 2.

In August, net revenues jumped to $2.3 billion from $1.93 billion YOY. GAAP earnings per share (EPS) was $1.12 as compared to 75 cents YOY. Operating margins improved to 44%. Furthermore, according to Wedbush Securities analyst Michael Pachter, “Activision had ‘Diablo II: Resurrected’ launch at the end of the quarter, so they’re probably going to surprise to the upside more than the others. ‘Candy Crush’ has also been killing it.” So, the outlook is bright for ATVI stock.

Take-Two Interactive (TTWO)

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Take-Two Interactive has been red-hot.

Since bottoming out around $145, the stock has since popped to $181. Heading into the holidays, I’d like to see it closer to $210. That is, if it can break above triple top resistance around $187.16 set at the end of May. Not only could holiday shopping season fuel further upside, but so could its wildly popular Grand Theft Auto V.

The company is getting set to release another version of the game for the Xbox Series X and Series S consoles, and Sony’s PS5 by March of next year. Coupled with other hot hits such as NBA 2K and Red Dead Redemption, and you can see why sales are hot.

We’ll see just how hot things could get when Take-Two posts earnings on Nov. 3. In its August earnings release, the company posted better-than-expected results. Net income came in at $152.3 million, or $1.30 a share, as compared to $88.5 million, or 77 cents YOY. However, it wasn’t all positive. Revenue did pull back by 2% to $813.3 million, and net bookings fell 29% to $711.4 million.

Meanwhile, analysts were looking for EPS of $1.08 on bookings of $684.3 million. Nonetheless, let’s see if TTWO stock can ride its hot streak into the new year.

Global X Video Games & Esports ETF (HERO)

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One of my favorite ways to trade any hot sector is with an exchange-traded fund (ETF). All because they offer greater exposure to industry giants at far less cost. At $29.85 with an expense ratio of 0.50%, the ETF invests in companies that develop or publish video games, produce hardware, or distribute video game and esports content.

Some of its top holdings include NVIDIA Corp. (NASDAQ:NVDA), Electronic Arts (NASDAQ:EA), Activision Blizzard, Take-Two Interactive and Netease Inc. (NASDAQ:NTES). If I were to buy 100 shares of the ETF, It would cost me $2,985. If I were to buy just 100 shares of NVDA, it would cost me $24,830. So, not only does the ETF offer greater exposure, it does so at less cost.

On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.


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