In our fourth edition of the Battle Of The Stocks, we size up two domestic gaming giants: Electronic Arts [EA] and Activision Blizzard [ATVI]. These behemoths account for a significant portion of the gaming market share in the United States.
The United States’ gaming market has been valued at $30.4B in the trailing 12 months prior to June this year. Comparatively, EA has reported sales of $5.1B while ATVI has sales of $7.2B in the same period. These two firm’s accounted for over 40% of total gaming revenue in the United States.
EA and ATVI have created significant investor wealth over the past few years. Activision Blizzard’s shares have generated absolute returns of 340% while EA stock has risen 348% in the last five years.
But historical gains are not an indicator of future performance. Let us look at the key financial metrics between the two companies and compare them to see which is a better buy at current levels.
Driven by the massive increase in share prices, the market cap or market value of Electronic Arts and Activision have gained significantly over the last few years.
Shares of EA have risen 57% over the last three years and is up 4.2% this year. Comparatively, the ATVI stock has gained 133% in the last three years and up 48% in 2018.
EA’s market cap is currently $33B while Activision’s market cap is higher at $59B.
Revenue growth is a key indicator to gauge the financial position of any company. Any firm that can grow its revenue will be worth investing in. EA reported sales of 5.18B in fiscal 2018. Analysts expect EA’s revenue to grow 1.9% to $5.28B next year, 9.7% to 5.8B in 2020 and 6% to $6.12B in 2021.
Activision Blizzard reported sales of $7.16B last year. According to analysts, the company is estimated to grow sales by almost 7.4% in 2020.
WINNER: Activision Blizzard
The significant rise in digital and mobile gaming has driven profit margins of companies higher. The high gross margin translates into robust bottom-lines for companies.
EA’s operating margin is expected to be 35% in 2019. ATVI’s estimated profit margin is estimated to be higher at 36% in 2019.
WINNER: A Tie
While the two companies are looking to improve profit margins, analysts and investors are concerned over the earnings growth potential.
Analysts expect EA’s earnings per share (EPS) to grow 14.3% over the next five years. Comparatively, analysts expect Activision’s earnings to rise 15.2% over the next five years.
WINNER: Activision Blizzard
We have looked at key financial metrics for the two stocks. Let us now see what Wall Street analysts expect from the two companies. Analysts have a 12-month average target price of $141.15 for EA, indicating an upside potential of 29%.
Comparatively, analysts expect ATVI’s share price to rise to $81.11, providing an upside potential of 4.5% over the next year.
WINNER: Electronic Arts
The scorecard is slightly in favor of Activision at 2-1. However, with the gaming industry set to experience revenue growth over the next few years, both the companies are likely to benefit.
Activision pips EA slightly with its extensive gaming portfolio and expertise in eSports. Activision Blizzard, in fact, created the first competitive global eSports league earlier this year.
Wealthlab Verdict: Activision Blizzard (2-1)
INFOGRAPHIC: How To Invest Your Money (In 8 Simple Steps)
Plenty of savers are making do with low rates of return on their deposits—almost eroding the value of their savings. Here’s a guide on how you should invest your money and gain some great returns off it.
Stock Trading: How to Choose the Best Online Brokers
Stock trading can be a risky business but done right it is an extremely lucrative investment option which yields excellent returns. It is true that trading is quite intimidating for someone who is new to the market and its ways which gives rise to the need for a good stock broker who can handle the job and ensure that the client gets the best returns possible for the money he or she is investing. But as a new investor it is absolutely important that you choose a very good trading broker. Here are some tips that will help you make that choice better.
Understand your trading needs
Before you even look into the services of a trading broker, it is essential that you are aware of your goals and needs from your stock trading. Firstly, prioritise your investment value, short term and long-term goal, and time that you are willing to spend on your trading in order to figure out where you stand. Now, narrow down on the specific kinds of stock exchange that you are looking into. With the wide variety of options available that you can choose from, it is important to narrow down to the specific field or fields and finally look for brokers who suit your specific needs.
Have a clear talk about trading fees
It is important to have a clear-cut discussion on brokerage fee and commissions that your broker will charge you. Ask about the charges per transaction, basic account charges, account minimums and even reimbursements if and when you choose to part ways so that you can have a proper idea about how much you are about to fork out for your trading. It is a good idea to have the talk beforehand so that you do not get into an arrangement which later becomes financially burdensome for you.
Look up reviews on the broker
You would not buy a new product without checking what its previous users have to say, right? Similarly, look up your prospective brokers No matter how promising or lucrative a broker seems with the terms, make sure you check the reviews by InvestinGoal to ensure that you are actually getting a good deal and not being sweet talked into not a good broker or even worse, being conned of your money.
Ask your questions
Do not be afraid to ask whatever questions that come to your mind before you make a deal. This will help you understand your trading better and thus, to get the absolute best out of your investment. It will also help you uncover any hidden charges, non transparent clauses as well that might have later hindered the desirable growth of your stock.
Give a test run
Ask the broker if you can give a test run of your account, and his technology before you actually invest your hard earned money. Many brokers allow you to create a free account which you can use to test their platform and check out user friendliness, ease of trading, quality of tools etc and thus, make an educated decision.
Getting the right broker is definitely one step towards a good stock trading investment. Therefore, it is very important that you take utmost care in picking the very best broker for your trading needs.
3 Simple Steps To Build Your Investment Portfolio
If you’re starting out with planning your investments, chalking out your goals and how you’d like to achieve them is incredibly important. You’ll need to understand what kind of assets you’d like to invest in–be it exotic instruments like private equity or the tried and tested ones like the treasury bonds, ETFs and stocks–and invest right. Here are three key strategies to build your portfolio:
1. Building Wealth Is All About Thinking Rationally (And Smart)
Having the right mindset can play a huge role in how you build your investments. It’s simply not just about strategy. To ditch following the latest fad in the market, you need to be responsible and have a sense of social indifference–coupled with confidence and patience.
2. Invest Like A Cheapskate
If you’re pumping in $150,000 as investment, on which you incur 1% as fees, look out for ways through which you can cut them down.
If you were to cut costs by a little more than a half, that’s saving you at least $1,120 in fees every year. But that’s not it–when this saving is compounded every year, that 1% fee can tally up to a million (if saved, could win you your big ticket to becoming a millionaire!)
3. The KISS (Keep It Simple, Silly) Rule
Funnily enough, most of us think investing your way through millions demands extensive knowledge of financial instruments or strategies. Surprisingly, it’s the simplest of assets that gave the biggest investors their biggest wins. Many successful investors highlight their success to stocks, bonds and other popular alternative investments, patiently held over time.