The gaming market is experiencing remarkable growth, particularly in mobile gaming, which, along with the rise of e-sports and gaming tournaments, is fueling the sector's success. Given this backdrop, investors may not want to miss strong gaming stocks like Electronic Arts Inc. (EA) and Playtika Holding Corp. (PLTK) in October.
The integration of AI in gaming is transforming the industry, enabling smaller studios to craft expansive game worlds with high-quality graphics and dynamic content. Additionally, the rise of AR and VR technologies is fostering immersive and interconnected experiences, further driving sector growth and meeting evolving consumer demands.
This year, the video game market is expected to generate $282.30 billion in revenue, with an annual growth rate of 8.76% projected through 2027, leading to an estimated market volume of $363.20 billion. This growth is fueled by increasing companies focused on mobile and online gaming, along with improved internet access and faster 5G connectivity.
Furthermore, the growth of gaming tournaments is playing a crucial role in the industry's expansion by drawing large audiences and boosting investments in infrastructure and talent development. In the United States, the 'Games' segment is expected to gain 27.8 million users (+13.78%) between 2024 and 2029, making it an attractive opportunity for investors now.
Considering these conducive trends, let’s examine the fundamentals of the two stocks from the Entertainment - Toys & Video Games industry, starting with number two.
Stock #2: Electronic Arts Inc. (EA)
EA develops, markets, publishes, and distributes games, content, and services for game consoles, PCs, mobile phones, and tablets worldwide. It develops and publishes games and services across various genres, such as sports, racing, first-person shooter, action, role-playing, and simulation, and licenses games from others.
On October 4, 2024, EA announced the worldwide launch of EA SPORTS NHL 25, featuring the new ICE-Q gameplay system, a revamped Franchise Mode, and enhanced presentation, delivering an immersive hockey experience on PlayStation 5 and Xbox Series X|S.
On September 27, 2024, EA launched EA SPORTS FC 25, featuring new gameplay innovations like Rush and FC IQ, and introducing women's football to Career Mode for the first time. Cover stars celebrated the event globally, enhancing the game's social experience.
In terms of the trailing-12-month net income margin, EA’s 15.77% is 403.4% higher than the 3.13% industry average. Likewise, its 9.06% trailing-12-month Return on Total Assets is 609.3% higher than the industry average of 1.28%. Furthermore, the stock’s 19.22% trailing-12-month levered FCF margin is 139.5% higher than the industry average of 8.02%.
For the first quarter that ended June 30, 2024, EA’s total net revenue and gross profit stood at $1.66 billion and $1.40 billion, respectively. Similarly, the company’s income came in at $364 million. Moreover, its net income was $280 million, or $1.04 per share.
Analysts expect EA’s EPS for the quarter ended September 30, 2024, to increase 10% year-over-year to $2.01. Likewise, its revenue for the same quarter is expected to increase 11.5% year-over-year to $2.03 billion. Over the past year, the stock has gained 18.9% to close the last trading session at $142.18.
It’s no surprise that EA has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Quality. It is ranked #4 out of 18 stocks in the B-rated Entertainment - Toys & Video Games industry. Beyond what we stated above, we also have given EA grades for Growth, Value, Momentum, Stability, and Sentiment. Get all EA ratings here.
Stock #1: Playtika Holding Corp. (PLTK)
Headquartered in Herzliya Pituach, Israel, PLTK develops mobile games in the United States, Europe, the Middle East, Africa, Asia Pacific, and internationally. The company owns a portfolio of casual and social casino-themed games. It distributes its games to end customers through various web and mobile platforms, as well as direct-to-consumer platforms.
On September 18, 2024, PLTK announced its acquisition of SuperPlay for $700 million, with potential additional payments of up to $1.25 billion based on performance. This strategic move aims to enhance PLTK’s mobile gaming portfolio by leveraging SuperPlay's proven expertise and successful titles.
In terms of the trailing-12-month gross profit margin, PLTK’s 72.52% is 40.3% higher than the 51.69% industry average. Similarly, its 0.85x trailing-12-month asset turnover ratio is 69.8% higher than the industry average of 0.50x. Its 13.83% trailing-12-month Return on Total Capital is 271.2% higher than the industry average of 3.73%.
During the fiscal second quarter that ended June 30, 2024, PLTK’s revenues amounted to $627 million. The company’s income from operations increased 1.1% year-over-year to $140.70 million. For the same quarter, the company’s net income stood at $86.60 million, with net income per share attributable to common shareholders at $0.23, up 14.4% and 9.5% year-over-year.
For the quarter ended September 30, 2024, PLTK’s EPS is expected to increase 77.1% year-over-year to $0.18, and its revenue for the quarter ending December 31, 2024, is expected to grow marginally year-over-year to $642.71 million. Over the past six months, PLTK’s stock has gained 8% to close the last trading session at $7.74.
PLTK’s bright prospects are reflected in its POWR Ratings. The stock has an overall A rating, which translates to a Strong Buy in our proprietary system.
It has an A grade for Value and a B for Stability and Quality. It is ranked #2 in the Entertainment - Toys & Video Games industry. To access PLTK’s grades for Growth, Momentum, and Sentiment, click here.
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About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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