It's no secret that the lockdown led to skyrocketing demand in gaming. But the pandemic could have only accelerated an already growing trend. If we look at its long-term perspective, it's not at all less appealing than this short-term boost. Over the next five years, analysts estimate the gaming industry to expand at a compound annual growth rate of 9.2%.
More than gaming- a discussion for sportsmen
One of the biggest names among gaming stocks is surely Electronic Arts Inc. (NASDAQ:EA) which will report its earnings today after markets close. EA has garnered investor attention because it engages its players themselves but because it lures sportsmen to discuss their game ratings on social media. It's such a popular discussion that even Walt Disney Company (NYSE:DIS) owned ESPN includes it in its prime-time segment. If we look at its stock performance, it managed to beat EPS estimates 50% of the time and revenue estimates 63% of the time over the last two years.
Gaming, cloud, streaming and more!
It might be a midcap, but Tencent Holdings (OTC:TCEHY) has such a diverse portfolio that besides gaming, it also covers mobile messaging, cloud, payments, and streaming. Its ecosystem even started overlapping with that of Apple, Inc. (NASDAQ:AAPL). In China, it is directly competing with Apple with its mobile messaging app WeChat which provides 300 million integrated Mini Programs to 1.16 billion monthly active users. Tencent is expanding its ecosystem of subscription-based services into gaming, music, and streaming video businesses. Tencent is better diversified and stronger when it comes to revenue and earnings growth and it has offered to buy out and take private search engine Sogou Inc. in a $2.1 billion deal.
As people became inseparable from their smartphones, mobile gaming became another segment that also experienced stellar lockdown during the pandemic. Moreover, it is expected to grow even faster than video games. Over the next few years, it is expected to expand at a compounded annual growth rate of 13.3%. Glu Mobile (NASDAQ:GLUU) existing games like Kim Kardashian: Hollywood and Design Home were behind its stellar first-quarter results. Also, the firm has been hoarding cash recently so it could be planning strategic acquisitions in the near future.
Penn National (NASDAQ:PENN) is largely a casino and racetrack operator. But its online gambling presences qualifies it for the gaming list. Roughly half of the states that Penn national operates in have legalized sports betting and, considering that the economy needs to recover as soon as possible from the most severe crisis of modern age, it is reasonable to believe that more will follow suit. Obviously, for Penn to benefit, sports betting needs sports events to resume and the world to go back to normal. We will learn know more when it reports its earnings on August 6.
Short-term / Long-term Outlook
The world fears the threat of a second wave of the pandemic and a slow return to normalcy. Yet, both of these trends can only benefit gaming. But, pandemic or no, its popularity isn't going anywhere.
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