Multiple pros agree: Activision best bet in the video game space

The leisure and entertainment segment emerged as a beneficiary of the COVID-19 pandemic as people were forced to shelter at home. The video game industry, in particular, benefited from this phenomenon and a Morgan Stanley note suggested that the pandemic “pulled forward around four years of video game user growth” in a few months.

Popular pick: Activision

The Morgan Stanley report highlighted ‘Call of Duty’ maker Activision Blizzard, Inc. (NASDAQ: ATVI) as a winner in the space. What makes the military-style game popular is the ability to attract gamers to spend hours battling each other in online competitions.

Activision stands to benefit in 2021 from continued momentum in the ‘Call of Duty’ franchise along with new game launches and other expansions in 2021, according to Morgan Stanley. Most notable, the video game company faces a potential catalyst with the launch of ‘Call of Duty Mobile’ in China next year.

Charts supportive of Activision

Technical analysis is also supportive of Activision’s stock, Fairlead Strategies Founder and Managing Partner Katie Stockton said on CNBC’s “Trading Nation.”

Reacting to Morgan Stanley’s note, Stockton said that Activision's stock has “seen a reversal of a three-month corrective phase” and has since experienced a “breakout of a major long-term resistance” of around $85.

Activision’s stock even hit a new all-time high of $90.78 on Wednesday. This could be the start of a long-term upside trend and the video game stock fits in nicely with investors looking for a long-term pick.

If the stock falls in the near-term along with a broader market selloff, investors should add to existing positions. She explained:

“We would be using a pullback to add exposure to take advantage of the long-term setup, which technicians like to call a cup-and-handle formation. It’s essentially a big, rounded basing phase followed by a corrective phase that then gives way to a major breakout, and that’s what we have in Activision.”

Alternative pick: Glu Mobile

Investors looking for exposure to the mobile gaming segment may want to consider Glu Mobile Inc. (NASDAQ: GLUU. Glu makes mobile games including ‘Kim Kardashian: Hollywood,’ ‘Deer Hunter’ and ‘Diner Dash.’

Mobile gaming is “more relevant than ever,” Strategic Wealth Partners President and CEO Mark Tepper also said on “Trading Nation.”

While Activision is the “strongest all-around gaming company,” Glu can still benefit given its unique exposure to more “casual” gamers that don’t want to buy expensive gaming consoles.