3 Stocks to Watch in Mobile and Social Gaming

Money can be made in this booming sector

By Anthony John Agnello, Consumer and Technology Writer


For investors, the mobile and social gaming boom has been frustrating. The mobile entertainment industry, including games, movies and music, is expected to generate $52.8 billion annually by 2015, according to a recent report by IE Market Research.

Secondary sales of virtual goods purchased inside of mobile and social games, so-called microtransactions, are on track to generate $2.1 billion by themselves according to a study conducted by Justin Smith of Inside Network and Virtual Goods Summit organizer Charles Hudson.

But the biggest earners are still private. Mobile-games king Rovio, creators of the phenom Angry Birds, is committed to independence for the foreseeable future. Zynga, the developer behind social game behemoths Farmville and Mafia Wars, is also raising investment capital on its own, offering tantalizing hints of a future IPO.

That doesn’t mean there isn’t money to be made. A few companies in the traditional retail video game business have already entrenched themselves in the mobile and social segment, and are only now starting to reap the rewards of calculated development in recent years.

Here are three publicly traded companies making their mark in the social and mobile games market:

Disney (NYSE:DIS)

Despite being only a fraction of the company’s overall entertainment business, the Disney is nonetheless a major player in the video game market. However, its recent efforts have been outshined by competitors — Epic Mickey for Nintendo Wii may have sold 1.3 million copies by the end of December 2010, but it still couldn’t compete with the likes of Nintendo’s (PINK:NTDOY) titles like New Super Mario Bros. Wii.

It’s interesting then that Disney is now pouring more capital into mobile and social games. Disney enjoys a user base of about 3.3 million Facebook players with a library of 37 titles on the social media site Disney said Monday that it had acquired Rocket Pack, makers of an HTML5-based platform for Web browser games. Pre-made HTML5 development tools coupled with Disney-owned intellectual property including its own characters and those in Marvel Comics will make for a potent blend of offerings on both Apple’s (NASDAQ:AAPL) HTML5-friendly iPhone and Web browsers in the coming two years.

Electronic Arts (NASDAQ:ERTS)

The company is best known for its traditional game console titles like Madden NFL 2011 and Need for Speed, but Electronic Arts is already an established leader in the social and mobile gaming space. Properties like Pogo.com, a casual gaming website, maintains a healthy premium subscriber base while its Playfish unit pulls in about 37 million players each month on Facebook alone. EA is also a powerhouse on Apple’s popular portables –14 of the top 25 best-selling iPhone games and 15 of the top 25 iPad games sold in December were published by the company. While the company’s digital business only generated $750 million overall in 2010, significant growth is expected thanks to the continued proliferation of the iPhone through recent partnerships with Verizon (NYSE:VZ) and the release of new models later this year.

NetEase.com (NASDAQ:NTES)

NetEase.com doesn’t have a major presence in the U.S., but its business in China is strong. The company offers a variety of web services, but its core is online gaming not unlike EA’s Pogo.com though with a greater emphasis on multiplayer role-playing games. The stock also trades at higher prices than it ever has, hovering around $47 since Monday and analysts at HSBC among other expect it to continue to climb, setting a target price of between $54 and $60. The social gaming website was named the 28th most trafficked site in the world in August 2010, and its revenue generation is starting to reflect that popularity.

Article printed from InvestorPlace Media, https://investorplace.com/2011/03/3-stocks-to-watch-in-mobile-and-social-gaming/.

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