A string of stellar earnings reports have sent top gaming stocks to new highs, significantly outperforming the S&P 500 index so far in 2020. Activision Blizzard (ATVI) is having the best year among its top competitors, with full-year bookings expected to grow at faster rates than results at Electronic Arts (EA 0.49%) and Take-Two Interactive (TTWO 1.49%)

The recent growth in Call of Duty marks a comeback for one of the best-selling game franchises of all time. What's more, a recent brand survey of teens shows the title is chipping away at the lead of Fortnite, which has been the most popular shooter on the market over the last two years.

Screenshot from Call of Duty Modern Warfare showing soldiers in action during combat.

Image source: Activision Blizzard.

Turn on the growth

Activision Blizzard, Electronic Arts, and Take-Two Interactive have seen strong engagement trends from their flagship titles, including Madden and The Sims 4 at EA, and Grand Theft Auto V at Take-Two. Here's a quick comparison of these companies' outlooks for the year.

Electronic Arts expects fiscal 2021 net bookings to increase by 10.8% year over year. The revised outlook comes after live services revenue jumped a whopping 61% in the fiscal first quarter, which includes in-game spending in the Ultimate Team game mode for EA Sports titles. 

Take-Two expects net bookings to decrease slightly in fiscal 2021, which can be chalked up to a lighter release slate for new games. 

However, Activision's updated guidance for 2020, issued on Aug. 4, calls for net bookings to grow by an impressive 19.3% year over year. This comes after management reported a "step change" in engagement for Call of Duty.

In the second quarter, Activision's player base grew 30% year over year, adding more than 100 million monthly active players. Over 75 million people have played Call of Duty: Warzone, the new battle royale experience that Activision released as a free-to-play title in March. 

Other franchises are performing well, including World of Warcraft, but Call of Duty is the star performer right now. 

Call of Duty makes a big comeback

The Call of Duty brand is widely recognized in the video game industry, but its hold on the first-person shooter category, one of the most played genres of video games, came into question a few years ago when competitors started releasing new games that took advantage of the rising esteem for battle royale shooters.

While Activision Blizzard was focused on building up its Overwatch franchise for the esports stage, a Korean game developer called Bluehole, in which Chinese gaming giant Tencent (TCEHY 0.33%) owns a small stake, launched PlayerUnknown's Battlegrounds in 2017. PUBG, as it's known by players, became an instant hit for audiences on popular streaming platforms, such as Amazon's Twitch.

Later that year, Epic Games stole PUBG's thunder with its own take on battle royale. Fortnite is now a gaming staple, ranking as one of the most-watched games on streaming platforms. 

It's no coincidence that Activision Blizzard announced disappointing results for 2018, contributing to the stock's 26% decline that year. On the fourth-quarter conference call in February 2019, management announced that 2019 would be a "transition year," as the company redirected resources to improve its biggest franchises. 

Call of Duty Mobile had been in development at least going back to 2018, but its release in the fall of 2019 is exactly what Activision needed. It was developed in partnership with Tencent and was downloaded more than 150 million times. 

The mobile version was the first of three consecutive releases in the Call of Duty franchise. In March, Warzone was released at the perfect time for the millions of gamers at home due to the pandemic. Engagement with the game has been so strong that some players have upgraded to the premium Call of Duty: Modern Warfare experience, which has padded Activision's revenue growth this year. 

What's more, Warzone seems to be gaining appeal with teenagers at Fortnite's expense. Piper Sandler's recent Taking Stock with Teens survey found that 62% played Call of Duty: Warzone, which is up from 33% in the spring. The survey included responses from 9,800 teens. 

Meanwhile, Epic Games' Fortnite has fallen slightly from 39% in the spring to 37%. Those numbers are way down from the spring of 2019, when 53% of teens played the colorful shooter. Also worth noting is that Warzone is currently one spot behind Fortnite as the fifth-most-watched game on Twitch, according to TwitchTracker. 

Screenshot from Call of Duty Black Ops Cold War showing a female character holding a weapon during combat.

Image source: Activision Blizzard.

What's next for Call of Duty

As the Piper Sandler survey reveals, gamers can be fickle. What is popular one year can change with the next hot release. Gamers are always looking for a fresh experience, which partly explains why Warzone gained such a wide following in 2020. But the phenomenal comeback and growing appeal of one of the top franchises in gaming is why Activision Blizzard deserves a vote as the best gaming stock of 2020.

While Activision Blizzard is not the best-performing video game stock of the year, it's on track to grow revenue and profits at levels worthy of a growth stock, which is what ultimately drives stock prices higher. Plus, there's more to come when Call of Duty Black Ops Cold War releases on Nov. 13.