Microsoft(MSFT) has decided to start off the new console releases with a boom. They announced the purchase of ZeniMax, the company that has brought such big titles such as Doom, Fallout and The Elder Scrolls. The biggest question is though, what does this mean for Sony(SNE)? Sony is currently the biggest console manufacturer and the second biggest game manufacturer so I really don’t think that they are going to be to worried about this acquisition. The real question that I have is will Microsoft make those 3 titles exclusive? Or will they release(late release) them for the PlayStation as well.
As an investor this is a perfect opportunity to get into the video game sector. When ever a company releases a console or a brand new game its always a great time to invest before it releases it. I personally always keep an eye on Activision Blizzard Inc(ATVI) and Electronic Arts(EA) but especially Activision Blizzard. More specifically when ever they release a new expansion to World of Warcraft because it usually means that people come back, people subscribe and people give them a boost in revenue. Activision Blizzard Inc was also originally supposed to release their latest expansion “Shadowlands” at the end of this month but it was pushed back. Maybe that is a good buying oppertunity? This theory of “new releases” can always work the same for chip and graphics card makers like Nvidia(NVDA) and AMD(AMD) who are also tied to gaming consoles because that’s who the consoles use to make up the system.
Now, sitting just from a console sales point of view Sony has been out selling everyone since the PS2 was released. They actually have 4 of the top 5 spots of best selling video games consoles of all time with all 4 Play Stations. That goes for the new generation consoles as well including the PS4, Xbox one and Nintendo Switch. I honestly won’t even talk about PC because they are literally in a league of their own haha(and every PC elitest out there will tell you that). These sort of situations though don’t really have a big impact for a company like Microsoft but it would be huge for a company like Sony. This is also good for AMD and their RDNA 2 GPU which is in the PS5 and Xbox Series X along with other AMD parts. Needless to say that AMD will be very busy now.
So what does this also mean for game makers as well? It means that they are now going to be needing to make some of their newer games compatible for these new consoles which means more video game sales. Not to mention needing to also make new games. Its easy for a company Activision Blizzard because they have their hands full with Overwatch 2, Call of Duty and the newly released Tony Hawk game. This also goes for Electronic Arts who is the biggest when it comes to sports video games. They have FIFA and NHL 21 still to come this year and right before the drop of the PS5 and Xbox Series X. EA also makes need for speed, star wars and Medal of honour which all have new games to be released later this year. Isn’t that all so convenient?
All these companies will benefit from new consoles being released and so will their investors. It should be easy to look at any of them and see the growth and opportunity there. I will admit that I had AMD for a little while when it was $12USD and sold it for a small profit when it hit $16USD. I truly didn’t know what I had in AMD but I also didn’t understand value and long term investing yet. Now looking at these companies I would even still say that Microsoft is a great buy(I literally talk about them more then any other company if you haven’t noticed haha). But I also feel that Sony is a good company to invest in as well because they aren’t just a console and video game maker, they also make every electronic you can basically think of. Lets take a look at those 6 companies numbers.
Microsoft(MSFT)-$206.19USD/Share, $1.5 Trillion Market Cap, 5.76 EPS, 31.9 P/E, Dividend Yield of 1.09%($2.24USD/Share) and a Dividend Payout Ratio of 32%.
Sony(SNE)-$74.00USD/Share, $90.8 Billion Market Cap, 4.92 EPS, 15 P/E, Dividend Yield of 0.46%($0.34USD/Share) and a Dividend Payout Ratio of 8%.
Activision Blizzard Inc(ATVI)-$78.30USD/Share, $60.44 Billion Market Cap, 2.34 EPS, 33.4 P/E, Dividend Yield of 0.52%($0.41USD/Share) and a Dividend Payout Ratio of 19%.
Electronic Arts(EA)-$129.07USD/Share, $37.3 Billion Market Cap, 6.74 EPS, 19.1 P/E, Dividend Yield N/A.
Nvidia(NVDA)-$522.49USD/Share, $322.4 Billion Market Cap, 5.45 EPS, 95.8 P/E, Dividend Yield of 0.12%(0.64USD/Share) and a Dividend Payout Ratio of 14%.
AMD(AMD)-$81.80USD/Share, $96 Billion Market Cap, 0.32 EPS, 90 P/E, Dividend Yield N/A.
These companies are really all in a class of their own. These are also not the only companies in the video game industry but are some of the most well known. In regards to the console wars I feel that even though Sony will out sell Microsoft every single time, as a long term investor I would still put my money on Microsoft. If I had to choose between Activision and EA? I would probably have to also say that Activision would be the better investment. They They may not have as many games put out each year but having month subscribers to your games goes even further I feel to help your revenue. Now is the hardest choice in my mind, Nvidia or AMD. I cannot believe how far Nvidia has come especially since the boom in crypto currency. AMD though has really battled and fought back to regain their share of the market from Intel(INTC) and Nvidia. They have done really well but I feel that Nvidia has been doing more as a whole. So I would have to say that Nvidia is and will be the bigger winner here. These are all just my opinions though and how I feel these companies will be in the long term, although none of them are a bad investment long term either.
That is all for today and remember everyone, invest in yourself first.
*Disclaimer, all share prices are after market close as of today October 2, 2020. I currently do not hold any positions in any of these companies.