Anyone even vaguely aware of the gaming world knows that Fortnite is one of the most popular games ever, and the company that created the gaming goliath is Epic Games. The company challenged Apple in court over the iPhone maker’s payment system and the 30% commission fee it charges software developers. While some feel that the judge on the case could render a split decision in the bench trial, she has indicated that she remains troubled by monopolistic forces at work in the iOS ecosystem, but acknowledged that federal courts do not run businesses.
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However, others take the stance that the judge will rule in Apple’s favor, as the law appears to be on the tech giant’s side. In a new research report, Stifel’s gaming analyst Drew Crum makes the case that if the judge does rule in favor of Epic Games, some of the top video game stocks would get a huge boost. The research report noted this:

The Epic versus Apple trial hearings concluded just a few weeks ago, and a decision is expected within the next few months. Epic has challenged the 30% platform fee Apple charges for all in-app purchases (IAPs) through its App Store (Note: Google’s take rate for IAPs via the Google Play Store is also 30%). Hence, the ruling in this case could have meaningful implications for mobile game publishers. At this point, our estimates do NOT contemplate any adjustments to the take rate going forward, nor do we attempt to predict the likelihood of such an outcome. With that said, we see a broader shift towards lower platform fees, providing a gross margin tailwind for relevant industry participants over time, all else being equal.

Four top gaming stocks are rated Buy at Stifel. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Activision Blizzard

This remains a top gaming pick on Wall Street, and it is on Stifel’s Select List of top stock picks. Activision Blizzard Inc. (NASDAQ: ATVI) develops and publishes online, personal computer (PC), video game console, handheld, mobile and tablet games worldwide.

The company develops and publishes interactive entertainment software products through retail channels or digital downloads and downloadable content to a range of gamers. Its legacy franchise Call of Duty continues to be hugely popular.

Investors receive just a 0.51% dividend. Stifel has a $121 price target on the shares, which is well above the $92.53 Wall Street consensus target. The last Activision Blizzard stock trade on Tuesday was reported at $95.27, which was down over 3% for the day.

Playtika

This stock has pulled back nicely from its 52-week high and is offering an outstanding entry point. Playtika Holding Corp. (NASDAQ: PLTK) develops mobile games in the United States, Europe and elsewhere. The company owns a portfolio of casual and casino-themed games. It distributes its games to the end customer through various web and mobile platforms, such as Apple, Facebook, Google, and other platforms, including its own proprietary platforms.
The company is the force behind the Playtika Boost Platform, which offers live game operations services. The U.S.-based company also has a proprietary technology that supports a portfolio of several games. Playtika has 15 games in its portfolio, including both casual and casino-themed games.

The Stifel price target is $38, while the consensus target is $37.45. Tuesday’s final trade was reported at $24.77, which was down almost 5% on the day.
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SciPlay

While perhaps a more off-the-radar idea, this stock offers some serious upside potential. SciPlay Corp. (NASDAQ: SCPL) develops, markets and operates a portfolio of social games for mobile and web platforms worldwide. It offers seven games, which include social casino games, such as Jackpot Party Casino, Gold Fish Casino, Hot Shot Casino and Quick Hit Slots, as well as casual games such as Monopoly Slots, Bingo Showdown and 88 Fortunes Slots.

The company’s social casino games include slots-style gameplay, as well as table games-style gameplay and casual games blend slots-style or bingo gameplay with adventure game features. It also offers titles and content from third-party licensed brands. The company, formerly known as SG Social Games, changed its name to SciPlay in March 2019.

The $21 Stifel compares with the lower $20.70 consensus target and Tuesday’s closing price of $17.11 per share.

Zynga

This very aggressive gaming play could have upside above the Stifel target. Zynga Inc. (NASDAQ: ZNGA) is a leading developer of mobile and social games. In the company’s relatively short history, it has developed a broad portfolio of games that includes several on Facebook and several top-grossing mobile apps. Key franchises include FarmVille, Zynga Poker, Hit It Rich Slots and Words With Friends.

Snap announced last year that it was expanding its partnership with Zynga to release new titles on Snap’s gaming platform. The partnership may expand Zynga’s reach to a younger demographic, though the near-term revenue opportunity is likely not impactful to Zynga. Content investment commitment from Zynga an indication of strong engagement and a very solid long-term opportunity.

The Stifel analysts also have this stock on their Select List, with a price target of $14. The consensus target is $13.28, and Zynga stock closed trading at $10.40 on Tuesday.

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While the Stifel analyst is clear that no upside is baked into their estimates, and it is very possible that Apple wins, there could very well be some adjustment to the prices paid by these top companies. They are all great ideas for aggressive growth stock investors.

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