Getting Serious About Games
Greg is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Electronic gaming has come a long way since the day a portly plumber first started his two-dimensional journey in search of mushrooms. Today, it is a huge field with significant stock profit opportunities, if you know where to look. Unfortunately, the industry often gets overlooked by investors because so many other technology stocks occupy the spotlight. Here are some gaming companies that deserve your attention, plus a warning about one that might surprise you.
Activision Blizzard (NASDAQ: ATVI) is behind some of the past decades' most popular games. Tony Hawk, a franchise of skateboarding games, Guitar Hero, and numerous film-based games (James Bond, Spider-Man, and the other Marvel characters are licensed to the company) are the most prominent of these. The current cash cow for Activision, however, is the wildly popular Call of Duty series.
Activision hasn't traditionally seen their shares skyrocket; however, over the last decade it's traced a fairly steady upward trajectory. For the past 3 1/2 years, it's been holding steady. My opinion is that this company's stock is prepped to start rising fast, and here's why: Since the early '80s, Activision has had a good eye for pinpointing what kinds of games customers would enjoy, and today there's a new, wide open market: games for mobile devices. Expect the next Angry Birds phenomenon to have the nostalgic Activision logo appear on its opening screen.
Most customers recognize the Electronic Arts (NASDAQ: EA) brand for its super-realistic EA SPORTS games, which are updated every year to include current real-life players. But the company is also establishing itself in the mobile market with adaptations of favorite board and card games that people can play on the bus, subway, etc.
The big news these days is that Electronic Arts is not doing well. It's shares took a deep dive to close out 2008, and they haven't yet recovered. But my prediction is that they will, precisely because they are paying attention to the mobile market. When tablets and smartphones get cheap enough to attract a wider customer base, look for Electronic Arts to grow quickly. Could that time be as close as this holiday season? Last year at this time, the big story was the brand new $199 Kindle Fire. This year's hot mobile device may well cost even less.
This is the surprise: Nintendo (NASDAQOTH: NTDOY.PK), for all its groundbreaking activity during the early years of electronic gaming, simply hasn't kept up. The only positive period in Nintendo's last decade was the release of the Wii in 2006, and that wave had ended by January 2010. The Wii was a great boost, but quickly faced tough competition from similar motion-based systems like the Kinect.
A big difference between Nintendo and the other game developers mentioned above is the fact that Nintendo builds its own devices. You can't download games on your iPad, smartphone, or Android-based device; you have to buy a Nintendo device and then buy the games you want. Perhaps the slow economy is mostly to blame, but it's hard to imagine customers choosing Nintendo's gaming devices over a versatile tablet or phone. Unless Nintendo makes a big change in order to widen its market to owners of non-Nintendo devices, the portly plumber may have to find a discount source for his mushrooms.
copyhubwriters has no positions in the stocks mentioned above. The Motley Fool owns shares of Activision Blizzard. Motley Fool newsletter services recommend Activision Blizzard and Electronic Arts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.