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These 2 Stocks Might Be The Best Plays In The Video Game Space For 2021

These 2 Stocks Might Be The Best Plays In The Video Game Space For 2021

Video game stocks have been hot in 2020, and traders say these 2 names in the sector are the best bets for next year. Here’s why.

2020 has been a good year for the video game industry. 

With the pandemic forcing people to seek entertainment at home and the debut of new gaming consoles sparking a surge in interest, video game stocks have been climbing higher this year.

In fact, the ESPO VanEck Vectors Video Gaming and eSports ETF, which tracks many of the biggest companies in the video gaming space, is up more than 82% this year.

Morgan Stanley (NYSE: MS) analysts took note this week, and said that the circumstances of 2020 “likely pulled forward four years of gamer adoption” given the spikes in users, the time they spent playing games this year amid COVID-induced global lockdowns, and how much money players spent while playing.

In a note from Sunday, analyst Brian Nowak said that video game producers will need to keep content fresh in existing franchises with updates and new stories to keep players engaged and to keep them playing for longer.

The Morgan Stanley analyst said his top pick in the space for 2021 is Activision Blizzard (NASDAQ: ATVI), citing its strong Call of Duty franchise and impressive slate of launches and expansions in the year ahead. Nowak boosted his price target on Activision shares from $100 to $108 – nearly 20% higher than the price as of this writing. 

Aside from Activision, Nowak also raised his targets for Electronic Arts (NASDAQ: EA), Glu Mobile (NASDAQ: GLUU), SciPlay (NASDAQ: SCPL), Take-Two Interactive (NASDAQ: TTWO), and Zynga (NASDAQ: ZNGA).

But of these names, traders say two of these stocks look especially attractive now.

“If you look at Activision in particular, it’s seen a reversal of a three-month corrective phase and also a breakout of a major long-term resistance” at $85, said Fairlead Strategist founder and managing partner Katie Stockton. “That short-term momentum may fall off, we believe, in January with the broader market briefly, but we would be using a pullback to add exposure to take advantage of the long-term setup.”.

Stockton went on to point out that Activision’s chart reveals a bullish cup-and-handle pattern, where a security’s price forms a “u” shaped cup and then a downward-drifting handle, which the stock has broken out from.

Source: TradingView.

Activision shares closed at $90.21 on Wednesday, clearing the $85 hurdle, which Stockton said sets the stock up for “long-term upside follow-through,” adding that she has added the stock to her firm’s list of ideas for long-term positions.

Strategic Wealth Partners’ Mark Tepper added that Activision also seems to be one of the best-positioned names in the video game space in terms of capitalizing on how much people spend.

“Activision, in my opinion, is the strongest all-around gaming company,” Tepper, the firm’s president and CEO, said. “Call of Duty is the best-performing franchise ever. They’ve got recurring demand. They can continue to just recycle old titles and make money off them year after year after year. And you’re getting some pretty good growth out of that company as well.”

Tepper also likes Glu Mobile, the producer behind mobile games like Deer Hunter, and Kim Kardashian: Hollywood.

“Mobile is now more relevant than ever. And in my opinion, mobile gaming appeals more to the casual gamer,” Tepper said. “From a valuation standpoint, it’s pretty attractive when you compare it to its peers as well. So I’d say Activision and Glu, those are the two best ways to play it.”

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