3 gaming stocks you can buy on the fall caused by Activision-Blizzard

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  • Successful mergers and acquisitions should maintain gambling stocks over the next few quarters.
  • Microsoft (IFFT): The technology giant will rise to the top three gaming companies in the world if a purchase agreement is reached Activision Blizzard (ATVI) goes through
  • Capcom (CCOEF): Japan’s gaming stock is ready for strong growth this year and has a strong portfolio of gaming franchises.
  • Nintendo (NTDOY): After a record 2021, gambling stocks are being traded at cheap multiples of valuation, creating an opportunity for long-term investors to enter this gaming giant.

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Gambling stocks have gained traction in the last two years after the pandemic triggered a period of unparalleled growth. As many of us stayed at home during the pandemic, growing investor interest in the industry spurred an unparalleled consolidation trend that should raise gambling stocks to new highs.

In January, Microsoft announced the largest mergers and acquisitions (M&A) deal in the gaming industry: a plan to buy Activision Blizzard (NASDAQ:ATVI) for $ 68.7 billion. ATVI shares rose sharply after the deal was recognized, but its shares fell last week amid growing fears that U.S. antitrust regulators will deny the merger.

Despite successful mergers and acquisitions in the gaming industry, the sector’s performance is measured by VanEck Video Gaming in eSports ETF (NASDAQ:ESPO) fell 21.07% to $ 52.49 per share; while, SPDR S&P 500 Trust ETF (NYSEARCA:VOHUN) lost only 10.18% to $ 429.06 per share.

However, the wave of gambling consolidation we have seen over the past year should push more and more speculative bets against a thriving industry and create a constructive environment for the whole sector. In this context, here are three stocks you can buy now to benefit from these results.

Ticker The company Current price
IFFT Microsoft $ 25.21
CCOEF Capcom $ 13.11
NTDOY Nintendo $ 54

Microsoft (MSFT)

Microsoft (NASDAQ:IFFT), the well-known technology giant is increasingly exposed to gambling and is in a good position to increase its market share in the event of an ATVI merger.

The company reported $ 3.74 billion in gaming revenue in the first quarter of 2022, up 6% from the first quarter of 2021, driven by growth in Xbox content, Game Pass subscriptions and hardware. The merger of ATVI will increase MSFT’s revenue from gambling and place the company among the top three gaming companies in the world. The deal is expected to close before June 2023, but is subject to regulatory approvals in the US, China and the European Union, raising concerns about a possible blockade or delay that could cause headaches for IFRS shares.

Nevertheless, the diversified technology giant has a strong foundation and is well placed to continue to surpass the gambling sector in the coming years. Net sales are expected to grow strongly, by 18.4% to $ 199 billion in 2022; while net profit is expected to jump 18.6% to $ 72.6 billion over the period. With this strong growth, the net margin of IFRS is expected to decrease compared to 2021, increased profit margin by 36.5% year on year.

MSFT exchanges with high valuation multiples, with a future EV / EBITDA of 20.9x and a price-to-earnings ratio of 2022e of 29.4x. Nevertheless, MSFT is an excellent diversified gambling stock that is growing at a steady organic pace and will benefit from the resulting drop in ATVI shares if the combined business succeeds or fails.

Capcom (CCOEF)

Capcom (OTCMKTS:CCOEF) is a Japanese developer of online, mobile and arcade video games with expertise in developing highly original games. February is the company released an edition of its famous fighting game this summer, Street Fighter 6, the next evolution of the series, which has sold more than 47 million units since it was first released 35 years ago. This constructive forecast should preserve CCOEF stocks.

In addition, Capcom is expected to boost peak growth this year, up 18% to JPY 111.4 billion from an annual growth rate of 16.8% in 2021. On the other hand, CCOEF net profit is expected to slow and increase by 2022 in 2022. 30.1% year on year to 32.4 billion JPY compared to the rapid progress last year of 56.3% to 24.9 billion JPY.

The Japanese video game developer is fairly appreciated compared to its gaming counterparts in the US. CCOEF shares are traded at 14x 2022e EV / EBITDA and 24.3x forward P / E. In addition, the gaming expert offers an estimated dividend yield of 1.18% in 2022, and recent exciting deals in the video game industry should encourage speculative betting on CCOEF shares given its world-renowned gaming franchises.

Nintendo (NTDOY)

Nintendo (OTCMKTS:NTDOY) is one of the leading video game developers and gaming console manufacturers with a strong portfolio of gaming franchises, including Mario, Pokémoni and The Legend of Zelda.

The gaming giant should also be on your watch list, as deals in the video game industry are reaching record highs. However, the outlook for NTDOY is slowing after last year’s strong performance. After jumping 34.4% to JPY 1.75 trillion in 2021, revenue is estimated to fall 3.7% to JPY 1.69 trillion this year. On the other hand, net earnings are projected to fall sharply by 7.2% to JPY 445.9 billion in 2022. This represents an increase in the profit margin of 26.3% per year.

The casino was a witness continuous growth of active users of Nintendo Switch gaming consoles and is expected to exceed the threshold of 100 million annually this year. In addition, stock exchanges have a discount compared to other large gambling stocks, as they continue to announce EVs / EBITDAs of 8.71x, a P / E ratio of 2022e of 15.7x and offer a moderate dividend yield of 3.22% in 2022.

Cristian Docan did not have (directly or indirectly) any positions in the securities mentioned in this article on the day of publication. The opinions expressed in this article are those of the author and are the subject of InvestorPlace.com Guidelines for publication.

Cristian Docan, a contributor to InvestorPlace.com, has been writing stock market articles for Seeking Alpha, Stocknews and Wealthpop since 2017. It uses a fundamental and technical approach to valuing stocks for readers, focusing on start-up investment and macro management. strategies.

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