The video gaming industry is poised to grow significantly in the coming months owing to rising demand for remote entertainment again amid the resurgence of COVID-19 cases. But while Unity Software (U) doesn’t look sufficiently fit to capitalize on the industry tailwinds, we think shares of prominent industry players Electronic Arts (EA), Playtika (PLTK), and Ubisoft (UBSFY (OTC:UBSFY)) are well-positioned to deliver solid returns in the coming months. Read on.The video gaming industry witnessed an upsurge in demand last year attributable to remote lifestyles, social distancing mandates, and rising interest in digital entertainment. While people began resuming outdoor entertainment activities earlier this year, with several countries now re-imposing pandemic restriction in response to the rapid spread of the COVID-19 Delta variant, the demand for video games is increasing again. Moreover, the increasing use of internet services and widespread availability of online games worldwide are projected to drive the industry’s growth in the years to come. The global video games market is expected to grow at a 12.9% CAGR over the next seven years.
However, Unity Software Inc. (U) has not been able to capitalize on the industry’s growth. Although the stock has surged 24.9% in price over the past month, the company’s weak financials compared to its peers make it susceptible to a pullback in the near term. In its last reported quarter, U’s net loss increased 442.4% to $148.34 million, and its loss from operations surged 500.5% to $149.18 million, demonstrating weak fundamentals. In addition, the stock has declined 21.3% year-to-date.
Therefore, we think it could be wise to bet instead on shares of fundamentally sound companies in this space Electronic Arts Inc . (NASDAQ:EA), Playtika Holding Corp. (PLTK), and Ubisoft Entertainment (UBSFY). These three stocks are better positioned than U to cash in on the growing demand for video games.