Gamers spent billions more on videogames during the pandemic, but what happens now?

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In 2020, global videogame sales surged 25% to $191.12 billion, one survey found. Can the industry keep it up once lockdowns go away?

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The COVID-19 pandemic, coinciding with a new generation of gaming consoles, has vaulted the videogames industry into a new stratosphere, and investors are about to see the results and the path to a sequel.

Activision Blizzard Inc. ATVI, -0.04% will start a parade of earnings from videogame companies this week, and analysts expect a strong showing across the industry in the final quarter that compares to pre-pandemic results. From there on, publishers will encounter increasingly more difficult comparisons to past quarters, as videogames flourished under stay-at-home orders that started en masse in March 2020, and Microsoft Corp. MSFT, -0.13% and Sony Corp. SONY, -0.

Activision said it expects adjusted earnings of 84 cents a share on revenue of $2.02 billion for the first quarter. Analysts surveyed by FactSet expect adjusted earnings of 70 cents a share given wide interpretation of how Wall Street views the company’s quarterly results. “In the context of more limited 2021 organic growth, we believe stock performance this year will be driven by execution across core franchises and investor enthusiasm for the new game pipeline—factors that we believe favor Activision most as the company has significant long-term opportunities that we do not see as fully reflected in current estimates,” Quadrani said of the industry as a whole.

Jefferies analyst Alex Giaimo, who has a buy rating on Activision, said the biggest question on the minds of investors is “how to think about the financial trajectory of 2021 given continued momentum within the video game space.” MKM’s Handler, who has a buy rating on EA, said that the company’s acquisitions have already boosted expectations going into 2022.

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