Moviegoing will likely always be on many people’s list of of things to do on a night out. But the pandemic decimated the industry in 2020, pushing global revenue down 71%. The need to stay at home drove sales of another popular activity — video games — past movies and music combined.
Despite the trends, traders became enamored with theater chain AMC Entertainment (NYSE:AMC) earlier this year. A combination of economic recovery and the traders’ motivation to burn those betting against the stock fueled a rally lifting shares 2,000% this year.
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It’s an interesting sideshow, but there are more reliable ways to grow your investment dollars in the entertainment industry. That’s why we asked three Fool.com contributors which stocks they thought could quintuple over the next decade. They chose Unity Software (NYSE:U), Skillz (NYSE:SKLZ), and Ubisoft Entertainment (OTC:UBSFY). Here’s why.
The engine behind the gaming industry
Jason Hawthorne (Unity Software): Unity is somewhat unique in the video game industry. First, it’s not just about video games. The company’s real-time three-dimensional (RT3D) software is used by architects to rapidly iterate building designs and detect flaws. It has similar uses in auto manufacturing. In the film industry, it’s reducing the time to create and edit digital scenes from days down to seconds. But it is a market leader in game development.
An astonishing 94 of the top 100 video game developers are Unity customers. As of the fourth quarter of 2020, 71% of the top 1,000 mobile games were made with the company’s RT3D software. That’s driven sales growth of 42% in both 2019 and 2020. So far in 2021, revenue has climbed 45% year over year. It isn’t profitable, but Unity management has committed to becoming profitable on an adjusted basis in 2023. Over the long term, it believes it can maintain greater than 30% revenue growth. That time horizon could be far out in more ways than you think.
One of the more futuristic use cases of Unity’s RT3D software is helping to create the metaverse — a fully digital world beyond the analog one in which we live. Most define it as some version of living in the internet. Others simply define it as a perpetual augmenting of our existing reality. Either way, management believes it will be hundreds of thousands of destinations created by companies like Roblox, Nvidia, Facebook, and Adobe. Unity plans to be a major player in its creation and operation, and it’s in the perfect position.
Unity is at the center of a powerful trend in entertainment. And it has a clear North Star. The company believes in reducing the distance and friction between creators and consumers. Succeeding on that front in both the real and virtual world should lead to a winning investment for shareholders.
An opportunity ripe for the picking
Jon Quast (Skillz): Skillz is a mobile gaming platform that allows developers to monetize their games…
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