Considering that most people carry smart devices with them 24 hours a day, it's not surprising that mobile gaming has grown exponentially in recent years. Games and e-sports analytics provider Newzoo expects revenue from mobile gaming to top $68.5 billion this year, accounting for 45% of the gaming industry's total global sales.
"It has come from nowhere to become, by far, the largest segment of the gaming world," Macquarie Group analyst Benjamin Schachter told Barron's. Moreover, games will make up 60% of all mobile app store spending in 2019, up from 35% six years ago, according to the analytics platform App Annie.
As traders navigate the tricky maze of challenges facing markets into year end, they should consider adding these three mobile gaming stocks to their playbook. Below, we delve into each company in further detail and work through several tactical trading ideas to determine the best places to buy and sell.
Activision Blizzard, Inc. (ATVI)
With a market capitalization of $38.81 billion, Activision Blizzard, Inc. (ATVI) is one of the world's largest video game publishers. The Santa Monica-based game maker's franchise portfolio includes "World of Warcraft" and "Call of Duty." Activision's revenue from mobile and ancillary, which accounts for 36.6% of consolidated revenues, declined 1.9% year over year in the second quarter. However, the company said that it expects its new "Call of Duty: Mobile" game coming this fall to drive revenue in its core "Call of Duty" franchise, backing up management's commitment earlier this year to extend Activision's franchises to mobile and new engagement models. The company's stock issues a 0.68% dividend yield and has returned nearly 18% year to date (YTD) as of Sept. 9, 2019.
Activision stock has roughly traded within a 10-point range so far this year, forming a rounding bottom pattern in the process. Last week, price broke the range's upper trendline at $51, which may lead to a test of the next level of crucial overhead resistance at $65. Furthermore, a recent cross of the 50-day simple moving average (SMA) above the 200-day SMA – referred to as a "golden cross" – signals additional gains ahead. Those who take a trade should think about placing a stop-loss order beneath the psychological $50 round number. Consider raising the stop to the breakeven point if price closes the third quarter 2018 earnings gap at $62.29.
Zynga Inc. (ZNGA)
San Francisco-based Zynga Inc. (ZNGA) develops, markets, and operates social games as live services in the United States and globally. The company's games are played on mobile platforms, such as Apple iOS and Google's Android operating systems, as well as on social networking sites, such as Facebook, Inc.'s (FB) platform. Zynga's revenue comes through mobile game downloads, in-game sales of virtual goods, and advertising. Popular games in the mobile gaming giant's lineup include "Words With Friends," "Empires & Allies," and "Farmville." Zynga delivered better-than-expected second quarter earnings and is preparing to release new game titles based on the "Harry Potter" and "Game of Thrones" licenses that should continue to drive revenue. Trading at $5.86 with a market cap of $5.59 billion, the stock has gained almost 50% YTD, outperforming the electronic gaming and multimedia industry average by 21% as of Sept. 9, 2019.
The mobile gaming stock's share price made gains between January and July before retracing to a nine-month uptrend line in August. Buyers pushed the stock up nearly 4% from this support level in Friday's trading session, which may result in a retest of major resistance at $6.50. A cross of the moving average convergence divergence (MACD) line above its signal line late last month confirms the recent upward price direction. Traders who go long should be prepared to say "game over" on a breach below key support at $5.50.
Glu Mobile Inc. (GLUU)
Glu Mobile Inc. (GLUU) develops, publishes, and markets a portfolio of free-to-play mobile games for smartphones and tablet devices. The mobile games maker, which generates revenue through in-app purchases and in-game advertising, distributes its products through digital storefronts, such as the Apple App Store, Google Play Store, and Amazon Appstore. The $679.40 million company has come under fire during the summer months amid the delay of a game licensed from The Walt Disney Company (DIS). Despite the setback, Glu CEO Nick Earl said that the Disney game, now scheduled for release in early 2020, will be worth the wait and that he expects it to deliver long-term sales similar to Activision's 2012 hit "Candy Crush." Glu Mobile stock trades at about 15 times forward earnings, while Activision and Zynga both trade at roughly 23 times. As of Sept. 9, 2019, Glu Mobile shares have tumbled 41.51% so far this year.
Glu shares moved higher between January and April but have remained stuck in a sharp downtrend since then. More recently, the price found support at the $4 level, which coincides with the lower trendline of a descending channel. Given that short interest in the stock sits near 10%, further gains this week could lead to a possible short squeeze as traders buy to cover. Those who enter here should set a take-profit order near $5.75, where the price encounters significant resistance from the channel's top trendline and falling 50-day SMA. Consider cutting losses if price fails to hold above $4.50.