Forget Roblox, Buy These 3 Video Game Stocks Instead
Demand for video games remains robust despite people returning to outdoor activities as the end of the COVID-19 pandemic looms and distancing warrants are lifted. Indeed, the global video game market is expected to reach $ 293.2 billion by 2027, growing at a CAGR of 9.3%.
Despite the favorable context, Roblox Corporation (RBLX), an online entertainment platform provider based in San Mateo, Calif., has been unable to keep up with industry trends. While the new state-owned company has the potential to grow its user base in the long run, the company may not be able to retain existing users and grow due to its financial weakness. In its most recently published quarter, RBLX’s net loss increased 80.5% to $ 134.22 million, and its operating loss jumped 85.1% to $ 135.06 million. The stock lost 5.1% over the past month.
Conversely, video game companies Electronic Arts Inc. (EA), Playtika Holding Corp. (PLTK) and Ubisoft Entertainment (UBSFY) are likely to experience a sales surge as they invest heavily in their R&D to introduce new games aligned with consumer interests that will also improve the overall experience.
Since these three companies have a lot of room to grow, we think they are better bets now.
Electronic Arts Inc. (EA)
EA creates and publishes games, content, and services for a variety of platforms, including consoles, PCs, smartphones, and tablets. The company’s games and services are backed by an intellectual property portfolio comprising well-known brands such as FIFA, Madden NFL, Star Wars, Battlefield, Sims and Need for Speed. EA is based in Redwood City, California.
Last month, EA acquired Playdemic Ltd. by Warner Bros. Games for $ 1.4 billion in cash. The main purpose of the purchase was to help EA expand its sports portfolio and accelerate its growth on mobile, allowing it to reach more people around the world with more games and content.
In the fiscal year ended March 31, 2021, EA’s net revenue increased slightly year-over-year to $ 5.63 billion. Its free cash flow from operating activities jumped 7.6% to $ 1.93 billion during this period. The company’s cash and cash equivalents increased 39.6% year-over-year to $ 5.26 billion.
A consensus EPS estimate of $ 6.38 for the current year represents an 11% year-over-year increase. In addition, EA has an impressive history of profit surprises; it has beaten consensus EPS estimates in each of the past four quarters. The consensus estimate of revenue of $ 7.39 billion for its 2022 fiscal year represents a 19.5% increase over the same period last year. The stock has gained 14.4% in the past nine months.
EA POWR odds reflect this promising outlook. POWR ratings assess stocks based on 118 different factors, each with its own weight. EA has a B rating for value and quality. Within the Entertainment-Toys and video games industry, it is ranked 9th out of 23 stocks. To learn more about EA’s component qualities, Click here.
Playtika Holding Corp. (PLTK)
PLTK is a mobile game developer with a platform that supports a range of games, provides live game operation services and unique technologies. The company owns and operates 15 games, including free mobile games. Apple, Facebook, Google and other online and mobile platforms are used by the company to distribute its games.
In March, PLTK announced that it had entered into a seven-year, $ 1.9 billion B-term loan, increasing its revolving credit facility to $ 600 million with a new five-year term, and completed its previously announced $ 600 million eight-year unsecured senior note offer. . The company plans to use the net proceeds of the offering with the new loans to repay existing loans and for other general corporate purposes.
For the first quarter ended March 31, 2021, PLTK reported revenue of $ 638.9 million, representing a 19.6% year-over-year increase. Its operating profit jumped 15.1% year-on-year to $ 130.3 million. Its cash and cash equivalents increased 604.4% from their value a year ago to $ 966.4 million. Of the society Adjusted EBITDA increased 38.6% from its value a year ago to $ 258 million during that period.
PLTK is expected to generate 10.3% revenue growth for the current year. Its EPS is expected to rise 245.8% year-on-year to $ 0.83 in fiscal 2021. The stock has gained 13.8% in the past three months.
PLTK’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which is equivalent to Buy in our POWR rating system. The stock also has a B rating for value and quality. In the Entertainment-Toys and video games industry, it is ranked # 1 out of 23 stocks.
In total, we rate PLTK on eight different levels. Beyond what we have stated above, we have also assigned PLTK ratings for sentiment, growth, momentum and stability. Get all PLTK ratings here.
Ubisoft Entertainment (UBSFY)
Based in Montreuil, France, UBSFY develops, publishes and distributes video games worldwide in physical and digital form for consoles, PCs, smartphones and tablets. The company creates software that includes storylines, layouts, and game rules, as well as design tools and game engines.
This month, Sustainalytics, a leading provider of environmental, social and governance (ESG) ratings, ranked UBSFY among the top 3% of companies in software and services, among the top 5% of companies. in the entertainment software segment, and among the top 6% of 14,142 companies covered in its 2021 ESG Risk Report. This recognition should help the company realize its long-term commitment to making a positive impact globally.
For its fiscal year ending March 31, 2021, UBSFY reported revenue of € 2.22 billion ($ 2.63 billion), which represents a 39.4% year-over-year increase. the other. Its operating income amounted to 289.4 million euros ($ 381.83 million), compared to an operating loss of 59.5 million euros ($ 70.28 million) during from the period of the previous year. Its net profit stood at 103.1 million euros ($ 121.78 million) for this period, compared to a net loss of 125.6 million euros ($ 148.35 million) during Fiscal year 2020. The company’s EPS was € 0.85 ($ 1), compared to a loss per unit of € 1.12 ($ 1.32) in the previous year period .
UBSFY EPS is expected to rise 16.1% year-on-year to $ 1.6 next year. Analysts expect UBSFY’s revenue to grow 1.6% year-on-year to $ 33.12 billion in 2022. UBSFY stock has gained 3.3% in the last month.
It’s no surprise that UBSFY has an overall rating of B, which equates to Buy in our POWR rating system. The stock also has a B rating for growth, value, and stability. In the same sector, it is ranked No. 2 out of 23 stocks.
In addition to the POWR Ratings that we have just highlighted, we can see the UBSFY ratings for quality, sentiment and momentum here.
Shares of EA were trading at $ 140.56 a share on Thursday afternoon, down $ 2.39 (-1.67%). Year-to-date, EA is down -1.88%, compared to a 16.10% increase in the benchmark S&P 500 over the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college, she majored in finance and is currently pursuing the CFA program and is a Level II candidate. After…