By Angela Palumbo
Videogame stocks could be a smart play following a postpandemic slowdown as new game releases and consoles continue to roll out, according to analysts at TD Cowen.
The videogame industry boomed during the Covid-19 pandemic as people were stuck at home. Videogame usage surged curing Covid, as children and adults stuck at home sought entertainment and a way to connect with friends and family through communication platforms like Discord. Online games and the associated chat was the closest thing many people got to human interactions during lockdowns.
Electronic Arts reported net bookings for the fiscal year that ended March 2021 of $6.19 billion, a 15% increase from the previous year. Take-Two Interactive Software's fiscal 2021 bookings of $3.55 billion rose 19% year-over-year.
Lockdowns didn't last forever, though. As normal life resumed, the videogame growth decelerated. EA's fiscal 2025 net bookings of $7.36 billion declined 1% from the prior year while Take-Two's net bookings grew 6% to $5.65 billion.
EA currently trades at 19 times forward earnings, well off its pandemic price-to-earnings multiple, which reached into the mid 20s.
"We believe that after a few years of sluggish growth following a COVID-19-driven boom, investors may be concerned that the videogame industry's best days are behind it," TD Cowen analyst Doug Creutz wrote in a research note on Wednesday. But he expects videogames to "remain an above-GDP growth industry for the foreseeable future."
"The videogame sector consistently outpaces global GDP growth, driven by expanding demographics, increasing monetization opportunities, and growing engagement per user," Creutz wrote. "This is not just about selling more games -- it is about extracting more value from each player through various monetization models including recurring subscriptions, virtual items, and seasonal content updates."
The TD Cowen analyst argued that with the recent launch of Nintendo's Switch 2 and the new games that come with that, plus the highly anticipated release of Take-Two's Grand Theft Auto VI could serve as catalysts for the stocks in the months to come.
American depositary receipts of Nintendo have jumped 56% this year to $22.75 following the successful release of the Switch 2. Take-Two stock is up 33% on the year, while EA has risen 7.8%
Creutz rates Take-Two, EA, and Nintendo as Buys.
Write to Angela Palumbo at angela.palumbo@dowjones.com
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June 25, 2025 14:09 ET (18:09 GMT)
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