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Why the Coming Super Cycle Will Boost Video Game Stocks

According to Barron’s, video game stocks such as Take Two Interactive Software Inc (TTWO), Activision Blizzard Inc (ATVI), and Electronic Arts Inc (EA), have significantly grown over the past five years. However, they have taken a big hit over the past year and have lingered the rest of the markets. Fortunately, this underperformance is about to change.
The launch of enhanced new gaming consoles over the next few years will boost the demand for video games and help to bring back the lagging stocks off their makers. That will benefit not only bingo promo codes enthusiasts, but also hardcore gamers who like to have fun with the newest video games.

What It Means For Investors

Sony Corp (SNE) lately announced the launch of PlayStation 5, its newest console, which will compete with primary competitor Microsoft Corp’s (MSFT) next console, codenamed Project Scarlett. Both consoles will arrive just in time for the 2020 holiday season, kicking off a new videogame console revolution that takes place every five to eight years.
Video games and video game consoles are what an economist would call Complementary goods. Just like cream and coffee, when the demand for one rises, so does the need for the other. According to Jefferies analyst Alex Giaimo, if a gamer drops $400 to $500 for a console, they’re going to buy some games too. It creates consumer demand.
Video game console cycle fuel stock return along with it. Not only for the console maker but for the game publishers as well. According to an analysis done by Cowen and reported by Barron’s, during the 12 months, previous major console launches in 2000, 2005 and 2013, shares of Electronic Arts, Activision, and Take-Two beat the vast stock market by an average 26%.
An additional factor that could help drive video game sales and stock returns is the growing popularity of eSports. Referring to research from eSport analytics agency Newzoo, Needham analyst Laura Martin states that the eSport audience is likely to rise by 14% yearly to a total of 645 million by 2022. Laura is optimistic about both Activision and Electronic Arts, regardless of Activision receiving the latest blowback over prohibiting an eSport player for
comments made in support of protests in Hong Kong.

Looking Ahead

The rise of cloud gaming and online streaming poses an alarming threat to the traditional gaming industry. However, the games in the streaming world have been no match for the big franchise games. Since there’re a few technical barriers preventing cloud gaming from providing the premier gaming experience, at least for now.
According to a report by Brian Nowak of Morgan Stanley, it could be years before cloud gaming products become scaled practical alternatives for most gamers.

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( images courtesy of mweb.co.za and polygon.com )

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