The video gaming industry is looking more to be recession-proof. Recent stats are proving that. Despite the pandemic-induced economic downturn, the video game industry posted outstanding revenues because people had little entertainment options but to stay at home to play video games. This recession, though, has proved different. The surging inflation and war in Ukraine that made our GDP in the last quarter fall by 1.4% affects every industry, including the video game industry.
Yet, the video game industry can boast of some outstanding stocks that can give you great returns while this economic downturn persists. Here are three I'm going to invest my $1000.
1 - Nintendo Co. Ltd (NYSE: NTDOY)
Nintendo had a dismal year in 2021 when it declined by 28%. Investors thought the Japanese gaming giant could not catch up with its rivals in a post-pandemic era. But this year has been different. Nintendo stock has risen 15%, outperforming its competitors in the video game industry.
Nintendo’s strength lies in the power of the brand, producing upcoming games, and the fact that it has a low valuation. Bearish investors believe the gaming giant would decline sooner than later because sales of its Switch console have fallen. They want the company to release a new console, but the management is unwilling. Already, rivals like Microsoft and Sony have released new consoles this year.
However, bullish investors like myself think otherwise. For one, Nintendo’s Switch console is doing fine. The President, Shuntaro Furukawa, has said that Switch is still in its mid-age. Moreover, it has shipped 105.6 million Switch consoles since its launch—an excellent sign. Also, Nintendo has a lot of first-party franchise games like Mario, Animal Crossing, Metroid, and Zelda. These are exclusive games that provide it with enormous revenue.
The company will launch new hit games this year. Despite the economic downturns, its lineup of higher-margin games and more recent games places the company on a sound footing. With 32 million subscribers on its platform, revenue will increase by 4% and earnings by 11%.
Nintendo Co. Ltd (NYSE: NTDOY) is currently trading at $55.93. The stock has withstood the selloff from the market within the past 6 months.
You should have Nintendo in your portfolio if you desire good returns on investment.
2 - Electronic Arts Inc. (NASDAQ: EA)
This year, Electronic Arts, or EA, has set sales, profitability, and cash flow records. This is a far cry from its rivals in the gaming industry like Activision Blizzard, which reported negative growth. On the engagement question, the data from its May 2022 earnings call shows that active gamers rose to a record 180 million. Also, these gamers are spending 20% more time on their games.
The company expects a sales growth of 21% this year, and this is a good result compared to the 7% growth recorded last year. But the question is whether EA will continue releasing engaging content this year? It has shown it can do this over the past years, but this year’s environment is weaker because of the rising inflation and interest rates that are slightly affecting gaming.
We believe that EA is a stock you should buy for the long term now that it's cheap. This is because the gaming market is still growing. EA and other gaming giants will benefit significantly when the markets return to normalcy and gamers have better financial pockets.
3 - Activision Blizzard (NASDAQ: ATVI)
This stock is up 29% over the past 6 months. Currently trading at $78, it is on a bullish run and should be cut early enough. Although, Activision Blizzard is among the companies that have taken a hit from the recent economic headwinds when looking at its chart from a year ago. its acquisition by Microsoft, which is still playing out, has given the stock some relief. Moreover, this takeover will eventually make the stock a desirable investment.
Activision Blizzard is one of the video gaming giants worldwide. It has hit video games in its franchise and mobile games. It has plans to release metaverse games after the acquisition by Microsoft. The stock has strong fundamentals.
We believe investors in Activision Blizzard will reap a lot of gain after the Microsoft acquisition. Also, the company has a strong gaming community which will help it overcome present challenges due to inflation, rising interest rates, and the war in Ukraine.
When the market opens next week, I will invest my funds in these.
Rate this article