Original title: Video Game Strong Selection of Three Ace Combinations Source: Financial Industry Website
Video games have become the spiritual sustenance of many people today. When the market is booming, this big trend is not to be missed. Investors are not to be missed. It's not too late for investors to settle down now, and they are expected to get a good return.
The size of the video game market has grown to tens of billions of dollars. The market is developing rapidly and continuously expanding, but investors still have a chance to get on the train. Now it's not too late to board this bullet train. According to Grand View Research's analysis, this market is expected to have a compound annual growth rate (CAGR) of 12.9% from 2020 to 2027, as the disposable income of millennials and Gen Z increases, so they can spend more money to buy favorite games.
There are a few companies that can say that they are making a big splash. They have a great advantage. August is veryIt's worth buyingThree video game companies are among them. The first is Activision Blizzard (Activision Blizzard). This blue-chip stock is the leader in the game market. Major games include “Call of Duty” (Call of Duty) and “World of Warcraft” (World of Warcraft), all of which are hugely popular. The second one worth buying is Take-Two Interactive. Activision's rival, Blizzard's rival, is also developing rapidly. The product lineup is huge, and the intellectual property is drooling. Finally, there's Zynga, a mobile game developer that actively acquired and created synergistic benefits, thereby achieving strong growth. Let's take a closer look at the three companies.
1. Activision Blizzard
Activision Blizzard is a leader in the game development market. Popular patented games such as Ace Games “Time to Win”, “World of Warcraft”, and “Overwatch” (Overwatch) are all extremely popular. The COVID-19 pandemic broke out, and stay-at-home orders implemented in various places stimulated the “stay-at-home” economy. The company's business then rocketed, driving stock prices soaring 72% year-to-date. Although Activision Blizzard's market capitalization has reached 63 billion US dollars, the stock price has multiple catalysts and is expected to rise steadily due to its many ace patent games and promising business models.
Activision Blizzard's traditional patent game is as popular as it was in the past. The value of this intellectual property bank is incredible. It can definitely support a predicted price-earnings ratio of 30 times. This kind of premium is really reasonable. The patented game “Time to Win” is still the company's cash cow. The company is also making every effort to monetize “Call of Duty: Warzone” (Call of Duty: Warzone). This game uses a “freemium” (freemium) model, which is very promising. The game is free to download, but players will have to pay for additional features and expanded functionality. “Modern Battlefield” was released in just a few months, and the number of downloads has reached 60 million, making it the fastest-selling game in Activision Blizzard's history.
Activision Blizzard currently has a dividend rate of 0.5% and has been raising dividends for 10 consecutive years. Although the dividend may seem pitifully small, the company outperformed its strong stock price, and the return was astonishing. Taking the increase in fiscal year 2019 as an example, it is equivalent to 19% net pocket dividend income.
2. Take-Two Interactive
Take-Two is another game giant whose business is already on track. This year's stock price performance was also impressive. Since the beginning of 2020, stock prices have risen 34%, while the S&P 500 index has only risen slightly by 1%. The company has a market capitalization of 18 billion US dollars. It has both popular traditional patented games and a strong lineup of games under development, so it is very advantageous, and the business is expected to continue to develop.
Take-Two's most famous patented games are in the action/adventure category, such as “Red Dead Redemption” (Red Dead Redemption) and “Grand Theft Auto” (Grand Theft Auto). Both games were developed in-house by Rockstar Games and also benefited from demand for home entertainment during the pandemic. Recurring consumer spending for the online edition of “Grand Theft Auto” surged 87% in the first quarter of fiscal year 2020 (ending March 31). Sales of “Blue Bloods 2” also exceeded management expectations. According to Take-Two revealed at the latest performance conference on May 20, the game sold more than 31 million people worldwide.
The lineup of games being developed by Take-Two is strong, and is expected to be successful on various platforms and distribution channels, and continues to grow. The company also reached a distribution agreement with Microsoft (Microsoft) in July to develop games specifically for the Xbox One platform and the upcoming Xbox Series X until May 31, 2023. The agreement helps the company monetize its rich intellectual property while reaching more gamers.
3. Zynga
Zynga is a mid-sized video game developer, and its stock price has risen 60% since the beginning of the year. Unlike the above two companies, Zynga focuses on the mobile game market. This smaller market has another challenge, but it is also a once-in-a-lifetime opportunity.
Since the entry threshold for the mobile game market is very low, there are already crowds of players. There are battlefields everywhere, and competition is fierce. If a newly developed patented game wants to stand out from the competition, is it really quite big? It is for this reason that Zynga has adopted an unrivaled business development model, specializing in the acquisition of already famous mobile games, and then leveraging synergistic benefits to benefit the development of existing businesses.
Zynga completed the acquisition of Istanbul Peak Games in July of this year at a price of 1.85 billion US dollars, thus acquiring Toon Blast and Toy Blast. These two popular games are hugely popular, and have steadily occupied the top 10 and top 20 smartphone revenue for the past two years, respectively. Through this acquisition, Zynga can also take back an outstanding team behind Peak Games, which will help the merged company develop more high-quality games in the future.
Zynga's core business flourished, with revenue increasing 52% to 404 million US dollars in the first quarter. To a certain extent, many games developed by Small Giant Games and Gram Games are worthy of praise. Both companies were acquired by Zynga in 2018, at prices of 560 million US dollars and 250 million US dollars respectively.