Video games have never been more popular, partially thanks to the pandemic that forced people to live in isolation. Aggregate eSports revenue hit an impressive $175 billion in 2020 alone. This figure represents a 20% jump from the prior year. The year ahead will likely be highlighted by even more video game industry growth.
eSports are gradually replacing regular sports, movies, and TV as Generation Z's top entertainment choice. Even some young millennials prefer competitive online gaming over other forms of entrainment. The challenge lies in identifying the stocks that will benefit from the video game industry's growth in the years ahead.
Below, I delve into three stocks that have the potential to pop as video gaming becomes even bigger: Nintendo (NTDOY), Playtika Holding (PLTK), and Gravity (GRVY).
Nintendo (NTDOY)
NTDOY is a POWR Ratings success with another overall grade of B, which translates into a Buy rating. The stock has a Quality Grade of A and a Momentum Grade of B. Investors can find out how the stock grades out in the rest of NTDOY's components (Growth, Value, Stability, and Sentiment) by clicking here. Of the 23 publicly traded companies in the Entertainment - Toys & Video Games industry, NTDOY is ranked fifth. Click here to find other top stocks in this growing industry.
NTDOY is priced about $5 below its 52-week high of $82.55. However, the stock's forward P/E ratio of 19.67 is still reasonable, considering it is a high-tech powerhouse. The stock also has a low beta of 0.71, indicating it will likely hold steady if the overall market gets volatile.
NTDOY provides an affordable online eSports-style service for a mere $19.99 per year. This membership provides gamers with access to seamless online play with just about no lag, a library of online titles, and even some retro games from the SNES and Nintendo 64 era.
Playtika Holding (PLTK)
PLTK makes mobile games played on miniature devices such as smartphones. PLTK also has a portfolio of casino-related and casual games to boot. PLTK has an overall grade of A, which is a Strong Buy rating in the POWR Ratings. PLTK also has a Quality Grade of A.
Click here to find out how PLTK grades out in the Growth, Value, Momentum, Stability, and Sentiment components. Of the 23 publicly traded companies in the Entertainment - Toys & Video Games industry, PLTK is ranked first.
Analysts have established an average target price of $37.18 for PLTK, indicating a potential 39% upside. Of the 11 analysts who have issued PLTK recommendations, three rate it a Strong Buy, and six rate it a Buy.
Gravity (GRVY)
GRVY is a worldwide entertainment business. The company is primarily focused on developing and improving games played online, meaning this is an emerging eSports industry power player. GRVY has an overall grade of B, translating into a Buy rating in the POWR ratings.
The company also has a Value Grade of A and grades of B in the Quality, Sentiment, and Growth components. Click here to find out how GRVY grades out in the Stability and Momentum components. Of the nearly two dozen stocks in the Entertainment - Toys & Video Games industry, GRVY is ranked third.
GRVY's online gaming and software service is geared toward the Asian market. The company's services are limited to Japan, Indonesia, Singapore, Malaysia, Thailand, and the Philippines. Though GRVY's market cap has not moved past the billion-dollar market, its revenue has grown quite rapidly across the past half-decade. As long as GRVY's mobile games released later this year are a hit, GRVY should be a solid play as we transition to the eSports era ahead.
NTDOY shares were unchanged in premarket trading Thursday. Year-to-date, NTDOY has declined -3.91%, versus a 12.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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