Video Game Stocks On the Rise In Anticipation of New Consoles

Electronic Arts, Activision & Take Two to Significant Growth

While the COVID-19 pandemic has wreaked havoc on stock markets all over the world, there is cause for hope in some industries. One of these industries has been the video game market and more specifically games that are set to be released on the upcoming PlayStation 5 and the Xbox Series X.

There are a number of video game companies that continually develop and publish new games for players to get their hands on. The major companies that are expected to see a significantly increased growth in stocks are EA (Electronic Arts), Activision Blizzard and Take-Two Interactive Software. According to MKM Partners analyst Eric Handler we can expect to see even more growth from these companies even though they have already been profitable during this difficult financial year. Handler has said that he believes “the new arriving consoles will be the catalysts which will increase multi year growth prospects.”

An additional reason for why Handler believes these video gaming companies stock will rise is due to the $10 price increase on games. Taking the industry standard from $60 to $70. While you would think that this would deter players to continue purchasing their favourite games, the data points to the opposite occurring. This is largely due to how quickly the new consoles were sold-out via pre order. Both the Xbox Series X and the PlayStation 5 were all sold out within a matter of hours despite the rather weighty price tag of $500. To further increase sales, in particular for those not willing to part with $500, Microsoft have offered a subscription based purchase of their Series X console. Microsoft will allow customers to pay $35 a month in order to get their hands on the new console.

New features generating interest

With new consoles, come new features. One of these features is being able to choose a diskless console option. According to experts this will add at least a $5-$6 increase to the margin of each individual game purchased. Prior to the announcement of pre order purchase availability for the new consoles we had already seen a rise in the share value of companies like EA, Take-Two and Activision. EA has risen 21%, Take-Two 35% and Activision 35% respectively.

There is a natural symbiosis taking place between the new gaming consoles and games that are yet to be released. As we have seen over the past two decades, the release of new consoles brings with it a significant increase in the shares value of gaming companies and Microsoft and Sony as well. Console gaming has become ubiquitous in living rooms all around the world and continues to grow every year. In a year where we have seen such financial uncertainty it is a testament to the outstanding longevity of these consoles and gaming companies that they have still managed to thrive.