Zynga Inc (ZNGA), Electronic Arts Inc. (EA): Why Sticking With the Leaders Is the Best Option in Gaming

If you are interested broadly in video games, Activision Blizzard, Inc. (NASDAQ:ATVI) might be a good option. The company just agreed to buy the bulk of Vivendi’s controlling stake in the company for just over $8 billion. That could put a financial damper on growth initiatives for a little bit at Activision, but with a new game console cycle about to take hold, that shouldn’t be too much of a problem. In fact, there’s top-line growth pretty much baked in the cake as customers step up to the new game machines.

Activision Blizzard, Inc. (NASDAQ:ATVI) owns popular titles like the World of Warcraft, Call of Duty, Diablo, and Skylanders. Its top line has been growing steadily, and the bottom line has grown from about a dime a share four years ago to around a dollar a share last year. Although it’s the better positioned of the two big game makers, its shares rose sharply after the news that it was buying its freedom. Still, despite the advance, the shares are still trading at a reasonable price to earnings ratio of around 15, about six points below its five year average.

A gamble…

Zynga Inc (NASDAQ:ZNGA) shares are a gamble right now. It either has to figure out how to go it alone, or crumble enough that a buyer comes in. Either way, you shouldn’t wager on it. Activision Blizzard, Inc. (NASDAQ:ATVI) is well positioned in the game space, and is still a good value even after its shares ran up on corporate actions. EA, on the other hand, is more focused on social games, which positions it well for the long term. That said, it’s still in turnaround mode.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard.

The article Why Sticking With the Leaders Is the Best Option in Gaming originally appeared on Fool.com.

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