Whether the economy is doing well or poorly, people want to be entertained. In a struggling market, most can find the money for inexpensive forms of entertainment such as movies, books, or video games.
Of the three, video games have had the strongest growth, and the best revenue. And the space has seen some merger activity in recent months reflecting the notion that the space is still undervalued when looking at the long haul.
One top publisher is Take-Two Interactive (TTWO). Shares are down nearly 30 percent in the past year, partly due to the company’s acquisition of publisher Zynga. But the consolidating game studio companies make for an increasingly attractive oligopoly play.
Currently, earnings are down over the past year, as theaters have reopened and supply chain issues have limited the production of the latest-generation video game consoles. But the publisher has gone from trading at 41 times earnings to 21 times earnings thanks to a lower share price.
Action to take: Investors may like shares of the company here for the long haul. The stock doesn’t pay a dividend, but it has strong cash flows and a growing portfolio of popular video game franchises.
For traders, shares have started trending slightly up in the past few weeks. The September $150 calls, last going for about $4.10, offer a mid double-digit return on a continuation of the move higher in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.