Skillz vs. Nintendo: Which Video Game Stock is a Better Buy?

Video game stocks have held strong throughout the past 15 months. While many other sectors declined as a result of the pandemic, the forced isolation proved to be a boon for this growing industry.

 

Part of the appeal of investing in the video game industry is the fact that the primary consumers of such games are mainly in their tweens, teens, 20s, and 30s. This means that the total market size for video games continues to expand especially with older players having more purchasing power.
 
Let’s shift our attention to the specific video game stocks worthy considering as investments. In particular, Skillz (SKLZ - Get Rating) and Nintendo (NTDOY - Get Rating) emerge from the pack as, especially attractive options.
 
SKLZ

SKLZ offers a platform for mobile games that players use to connect. This platform makes it easy for game makers to incorporate social gaming including competitive elements into gameplay. Previously known as Flying Eagle Acquisition Corp, SKLZ is currently trading at $22.56 per share.

SKLZ is a POWR Ratings loser with an F overall grade indicating it is a Strong Sell. Though the stock has a B grade in the Momentum component, it has Fs in the Value, Sentiment, and Stability components. Click here to learn more about how SKLZ fares in the rest of the POWR Ratings components such as Quality and Growth.

Of the 23 publicly traded companies in the Entertainment – Toys & Video Games category, SKLZ is ranked last. You can find out more about the stocks in this industry by clicking here.

SKLZ games are intriguing as they require a little bit of skill and luck. Add in the fact that SKLZ partnered with the National Football League and there was even more reason for investors to be bullish about the stock. However, SKLZ had no earnings and a P/S ratio around 70 when measured in terms of ’20 revenue when the deal with the NFL was struck so there was some skepticism about the company’s true merits.

It must be noted SKLZ doubled its fourth-quarter revenue as well as its revenue for the entire year. Furthermore, the SKLZ bulls insist the company’s acquisition of Aarki, an ad tech business, is a positive sign. SKLZ executives have also insisted they will integrate an eSports ad platform following the acquisition of Aarki.

NTDOY

NTDOY is gaming royalty. Kids, tweens, teens, and even some of those who have reached the adult years eagerly anticipate NTDOY’s latest offerings. Though the majority of NTDOY’s games are geared toward youngsters, a considerable number of those in their 20s and 30s play NTODY titles as they have such a deeply ingrained nostalgia for the company’s fun electronic digressions.

NTDOY is currently trading at $77.86. The stock’s forward P/E ratio of 20.23 is not outrageously high because NTDOY is a tech pioneer. NTDOY’s 52-week high is $82.55 while its annual low is $51 and change.

NTDOY has a B POWR Ratings grade. The stock has an A Quality component grade along with a B in the Momentum component and Cs in the Value and Sentiment components. Click here to find out how NTDOY grades out in the Stability and Growth components.

Of the 23 publicly traded companies in the Entertainment – Toys & Video Games category, NTDOY is ranked sixth. You can find out more about the stocks in this segment by clicking here. As a whole, the sector has a C POWR Rating grade.

Which is the Better Play?

NTDOY is the superior play. NTDOY has a better overall POWR Rating grade. Furthermore, NTDOY’s POWR Rating component grades are better than most of those for SKLZ. Add in the fact that NTDOY is ranked just outside of the top five of its sector while SKLZ is ranked dead last in its segment and it is that much easier to understand why NTDOY is the better play. As long as NTDOY continues to churn out high-quality consoles after the Switch reaches the end of its lifespan, there is a good chance NTDOY will remain at the top of the video game space.


SKLZ shares were trading at $23.31 per share on Wednesday afternoon, up $0.22 (+0.95%). Year-to-date, SKLZ has gained 16.55%, versus a 13.33% rise in the benchmark S&P 500 index during the same period.