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Videogame Stocks Have Been Hot Lately & Traders Say These 2 Stocks Are The Best Bets In The Space Now

Videogame Stocks Have Been Hot Lately & Traders Say These 2 Stocks Are The Best Bets In The Space Now

The videogame sector has been surging higher and of all the names in the space, these 2 stocks look the most attractive now. Here’s why.

Videogame stocks rose higher this week after Electronic Arts (NASDAQ: EA) announced it is acquiring Glu Mobile (NASDAQ: GLUU) for $12.50 per share, or $2.1 billion.

Both names rose higher this week, with EA rising more than 3% and Glu gaining nearly 40%. Activision Blizzard (NASDAQ: ATVI) shares have added more than 11%, while Zynga (NASDAQ: ZNGA) has jumped 16% on speculation that it could be the next takeover target in the space.

Seemingly the only stock in the videogame sector that hasn’t been on the rise this week is Take-Two Interactive (NASDAQ: TTWO), which slid even after delivering an earnings beat and raising full-year guidance. 

“We’ve had an amazing year, and we’re now guiding for a full year that will be $800 million higher in net bookings than we had originally guided to,” Take-Two CEO Strauss Zelnick said to Barron’s. “We’re guiding to setting a record across the board.”

But of the big names in the space, Nancy Tengler, chief investment officer at Laffer Tengler Investments, says there’s one name in the space that looks particularly attractive now.

“We’ve been playing the gaming game via Microsoft (NASDAQ: MSFT), and one of the reasons for that is that you get a lot more growth,” Tengler said.

Microsoft reported last month that is latest quarterly gaming revenue topped $5 billion for the first time, driven by 86% growth in hardware revenue for the Xbox, reflecting the launch of a new generation of gaming consoles.

“With the latest Xbox announcement and launch, which was the best in the company’s history, gaming revenues went above $5 billion for the first time, and Xbox Live now has one r100 million monthly active users, Game Pass 18 million, plus you get the cloud business and you get Office and Teams thrown in as well, so that’s our play,” Tengler added.

Strategic Wealth Partners’ Mark Tepper has his eye on another stock in the space: Activision Blizzard.

“Activision, right now, is one of our top five holdings,” Tepper, the firm’s president, said. “In my opinion, they’ve got some of the best video game franchises. They’ve transitioned very well towards in-game purchases, and they have a good strong mobile footprint, and that’s what a lot of these video game makers want to get to.”

Activision’s shares surged last week after the company’s biggest videogame franchises helped deliver an earnings beat. 

The videogame publisher posted a 13% gain in net bookings to $3.05 billion, while analysts had expected net bookings of $2.79 billion. Activision also posted revenue of $2.41 billion, up from $1.99 billion a year ago, fueled by strong sales in franchises such as Candy Crush, Call of Duty, and World of Warcraft.

“In a year filled with adversity our extraordinary employees were determined to provide connection and joy to our 400 million players around the world,” said Activision CEO Bobby Kotick. “They accomplished this as well as generating record financial results for our shareholders.”

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