The Covid-19 pandemic was arguably the biggest catalyst for the growth of video game stocks. Many people stayed home during this time to avoid contracting the virus, but video games are now a popular way to socialize virtually. Some of the biggest games, like Grand Theft Auto V, have been very profitable for investors. Games make the majority of their revenue soon after release.
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Mobile gaming
As more people spend time inside the house. The game industry is booming and, video game stocks are gaining popularity. Banks and analysts have raised their price targets, and mobile gaming has prompted more companies to focus on new technology and improve their games. One example is Netflix. Netflix is new to the industry and may only take a couple of years to become one of the top mobile game stocks. With more than 220 million monthly users and a growing intellectual property database, Netflix may be the next big thing in mobile gaming. Its five mobile games are available for free and are compatible with Android devices. Other companies making moves in the gaming industry include Microsoft, Sony, and Take-Two.
Esports
In addition to the high popularity of esports, video game stocks are also subject to cycles. Sales spike around holidays, new purchases occur after new consoles are released, etc. While video game stocks may not be multi-bagger candidates right now, they have the potential to be so with the right strategy and culture. By buying shares of a gaming company during these cycles, you can reduce your risk and potentially double your money.
Publicly traded companies connected to esports include Tencent, Riot Games, and Activision Blizzard, which are known for their popular titles. YouTube is the largest investor in esports, having signed an exclusive multi-year deal to stream Faceit’s Esports Championship Series.
A diversified basket of video game stocks
A diversified basket of video game stocks is increasingly popular among investors. The video game industry is growing, with spending expected to reach $200 billion by 2023, up from $180 billion last year. The growth of video games is a perfect fit for a basket approach, in which investors purchase several stocks within the same industry. For example, Activision Blizzard (ATVI) generates about half of its revenue from Call of Duty, and the company has three different ways to play the game. You can choose from a traditional premium version, a free-to-play game called Warzone, and even a mobile version.
Investors often focus on one stock when purchasing video game stocks. However, video game stocks are volatile, and if you make the wrong move or don’t follow the market trends, you can lose everything. Luckily, some Exchange-Traded Funds allow you to invest in video game stocks while avoiding the pitfalls of investing in one single stock. These ETFs allow you to build a diversified basket of video game stocks and are better equipped to provide a steady and sustainable growth rate.
Ability to weather the economic recession
The ability of video game stocks to weather economic recession may depend on the video game industry. Some analysts believe that video games have a high capacity to endure market swings. For example, BMO Capital Markets says that the popularity of free-to-play games such as Fortnite has led to an underappreciation of traditional video game franchises. The industry may be immune to recession because it believes that people will continue to buy video games during tough economic times. Video games are also generally considered of higher value than other entertainment options.
The ability of video game stocks to weather economic recession depends on several factors. The largest catalyst for video game stocks was the Covid-19 pandemic. The illness forced many people to stay home. But people also need to remember that video games provide an opportunity to socialize virtually.
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