The simulated reality of video games is proving to be a big draw for investors. Stocks for video gaming companies have been on a tear. For example, Activision Blizzard, Inc. (ATVI) is up by 74 percent, while Electronic Arts Inc. (EA) has climbed by 64 percent since the start of this year. The surge in their numbers can be attributed to the rising sales numbers as well as new initiatives by companies to broaden their sales channels.
According to a report in The Wall Street Journal earlier this month, video game developers have also stepped up to the plate and are developing new mechanisms to generate revenue. The end result is that video game company stocks have further room to grow. Here is a look at two video game companies that have made news this year. (See also: Investors May Love the Fast Action in Video Games.)
The Santa Monica, California-headquartered company has had a stellar performance in the markets. In the past five years, its stock has racked up growth. A large reason for the success is its e-sports initiatives. Earlier this month, Activision launched a league version of its popular “Overwatch” game, which boasted 30 million registered players in the first quarter of 2017. The league could turn out to be a future money spinner for the company. Its CEO Robert Kotick explained the math during Activision Blizzard’s first quarter call. According to him, the NFL generates $12 billion in revenue from 240 million viewers who watch approximately 7 billion hours of NFL content. “With hundreds of millions of people already watching e-sports and playing our games, over the long term our goal is to create opportunities that we believe could be of a similar scale,” he said. (See also: Is Activision Overbought at These Levels?)
Take-Two Interactive Software, Inc. (TTWO)
In the past year, Take-Two’s stock has risen by 100 percent on the back of increased sales and a positive earnings beat. The latest in its franchise “Grand Theft Auto” series set a record in sales numbers, surpassing $1 billion within three days of its release. The surge in its revenue is evenly distributed across geographies, with 51 percent and 52 percent increases in sales in the United States and abroad, respectively. What’s more, micro-transactions are becoming an increasingly important part of its revenue mix. In its latest earnings call, the company divulged plans to create an e-sports league in conjunction with the NBA. Given the financial opportunity, the league could have a substantial impact on Take-Two’s bottom line. (See also: Why Investors Are Buying Take-Two Interactive.)