The Biggest Trend in Entertainment Continues to Point to Profits

Even before the pandemic, sales of video games were topping box office receipts. And with a world loaded with small indie studios to developers producing popular titles, video games are a growing source of revenue for the entertainment sector.

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  • That’s a trend likely to continue, thanks to the latest generation consoles and an endless stream of new games in production. The strong cash flows from creating video games has made for a massively profitable niche in the entertainment sector with room to grow.

    One big player is Activision Blizzard (ATVI). The company just beat estimates and even raised its earnings guidance.

    Known for a series of games including World of Warcraft, Candy Crush Saga and Call of Duty, the company has a number of big-name franchises that can continue to provide prodigious cash flow for years.

    Shares have declined in recent weeks and are more than 10 percent off their highs from early February. With strong earnings numbers, shares may turn around and rally from here.

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  • Action to take: Shares yield just 0.5 percent, so investors may not want to buy just for the dividend.

    For options traders, the August $100 calls, going for over $3 per contract, can potentially deliver mid-to-high double-digit returns in the next few months. They stand a good chance of moving in-the-money, and could even provide triple-digit gains if shares break to new all-time highs.

     

    Disclosure: The author of this article has no positions in the stock mentioned here, but may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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