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Gaming Stock Battle: Activision Blizzard (ATVI) vs. Nintendo (NTDOY)

The video game world, like many other industries, heats up as the holiday shopping season kicks off. But the gaming industry is so much more than a three-month period of “buy the hottest new game for your kids.” The video game industry is a global powerhouse that takes in billions of dollars a year, and it is set to continue to skyrocket.

This year, based on market research firm Newzoo’s ” Global Games Market Report ,” 2.2 billion video gamers around the world will help generate $109 billion in revenue for the global video game industry. And this 7.8% year-over-year jump in sales is only part of the story.

Esports’ popularity and its newfound economic viability has created a whole new growth sector within the industry. The professional video gaming industry is projected to grow 41% from last year to hit $696 million. And the Olympic Council of Asia recently announced that it will include esports in the 2018 Asian Games-spurred by support from Alibaba’s BABA Alisports.

With so many companies set to profit from the gaming market’s continued growth, let’s take a look at two big-time video game players with great Zacks Ranks to see which stock is the best investment right now.

Activision Blizzard, Inc. ATVI

Activision Blizzard’s stock has soared in 2017, experiencing a 77.79% year-to-date price change, which makes the S&P 500’s 10.89% gain look modest. Now, the company’s stock price sits just below its all-time high of $66.58 per share. This might turn off some investors who tend to stay away from stocks at current highs, but let’s look at some of the company’s fundamentals and projections to see what’s really going on.

The maker of widely popular video games such as Call of Duty and World of Warcraft is coming off a better-than-expected second quarter that saw its revenues pop 4% to hit $1.63 billion. Maybe more impressively, Activision Blizzard’s sales from its digital channels jumped 15% to reach $1.31 billion. The company boasted 407 million monthly active users last quarter.

Activision Blizzardstock is currently trading at 30x earnings, which is not great compared to the overall market, but its 2.22 PEG ratio does match the industry average. The company’s P/B ratio of 4.98 also hovers right around the industry average, so value investors don’t need to be too worried here.

Thecompany’s Current Ratio of 2.47 tops the industry average. Activision Blizzard’s90.25% cash flow growth also helps to show that the company is on a strong growth trajectory. Based on our current consensus estimates, the company’s sales are expected to climb 10.87% this quarter and gain 4.10% for the year to hit between $6.61 billion and $7.14 billion.

Within the past 60 days, ATVI has received six upward earnings estimate revisions for its full year, and the video game giant has also only missed earnings estimates once in the last 14 quarters.

Activision Blizzardis currently a Zacks Rank #1 (Strong Buy).

Nintendo Co., Ltd. NTDOY

The legendary Japanese video game company has experienced a rebound in the last couple of years, as it got back to the basics that made the company a household name around the world. Nintendo is currently a Zacks Rank #2 (Buy), and its new Switch consoles are poised to help keep the company’s resurgence going strong.

Nintendo’s most recent quarterly revenues hit $1.37 billion, which marked an almost 150% year-over-year jump. The company’s sales jumped based on strong demand for its multi-purpose Switch consoles. Nintendo expects to sell 10 million of its $299.99 Switch consoles in its current fiscal year.

Shares of Nintendo have skyrocketed this year and hit a new 52-week high of $48.65 a share on Wednesday. But investors who are worried that it will be hard for the Super Mario maker to jump into a new range might consider some key Zacks Consensus Estimates. Our current consensus estimates call for sales to skyrocket 106.67% this quarter and 70.68% for the full-year to hit a high-end estimate of $7.91 billion.

Our consensus estimates also project EPS growth of 203.59% this fiscal year. That expansion is projected to continue, with current consensus estimates calling for 61.73% EPS growth in the next fiscal year.

The company has received one positive earnings estimate revision for its current quarter within the last 60 days. In that same time frame, Nintendo also received three positive revisions to its full-year estimates and two positive revisions for its next year estimates.

Bottom Line

The battle between two video game industry heavyweights was certainly not lopsided and it could very well prove to be a split-decision. Activision Blizzard’s games and Nintendo’s consoles have loyal and ever-growing user bases.

But with Activision Blizzard’s foray into the world of epsorts, with its new “Overwatch” league that has seen NBA owners buy city-based franchise for $20 million, the long-term edge could lean in its direction.

Also, the proliferation of smartphones around the world, even in some of the poorest nations, means more people have access to mobile videos games, and Activision Blizzard is growing its digital gaming sector at a huge rate.

Still, both companies are strong, boast high Zacks Ranks, and look poised to continue to grow.

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Activision Blizzard, Inc (ATVI): Free Stock Analysis Report

Nintendo Co. (NTDOY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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