The gaming industry has benefited immensely due to the pandemic-induced tailwinds. Consequently, returns for gaming stocks have been remarkable over the past year and continue to be impressive in recent months.
The video game sector grew at a break-neck speed well before the pandemic. However, the pandemic has supercharged growth in the sector, and researchers estimate that annual spending in the sector could hit $200 billion by 2023. Studios with durable franchises and the ability to keep up with consumer expectations will benefit the most in the long term.
Whether you’re looking at amateur tournaments or playing alongside your favorite pro player on streaming services, there are now more opportunities than ever before where gamers from all over can meet up with others who share their passion. So, with that in mind, these are some of the most promising gaming stocks you can add to your portfolios today.
- Microsoft (NASDAQ:MSFT)
- Activision Blizzard (NASDAQ:ATVI)
- Zynga (NASDAQ:ZNGA)
- Sea Limited (NYSE:SE)
- Nvidia (NASDAQ:NVDA)
- Take-Two Interactive (NASDAQ:TTWO)
- Electronic Arts (NASDAQ:EA)
Now, let’s dive in and take a closer look at each one.
Gaming Stocks To Buy: Microsoft (MSFT)
Microsoft has been a major player in the gaming business ever since its hugely successful video game console in the Xbox. In addition to the Xbox, Microsoft offers a subscription service called Game Pass and other digital offerings, which significantly add to its gaming revenues. According to the company, the Game Pass had close to 18 million subscribers at the start of the year. And as of September, Take-Two CEO Strauss Zelnick said subscribers are now at 30 million.
Last year, the company generated a colossal $9.5 billion in gaming revenues, which was even larger than Activision. Moreover, Xbox hardware revenues shot up 166% from the prior-year period in its most recent quarter. As the raw material shortage eases off, Xbox hardware and software sales are expected to rise at an even healthier pace boosting MSFT stock in the process.
Activision Blizzard (ATVI)
Activision Blizzard is the world’s largest video game developer by revenue and owns arguably the most popular video game franchises currently. These include franchises including Call of Duty, Overwatch, Candy Crush Saga and others. Moreover, it has also been making a lot of inroads in the esports realm, which will open up a brand new growth avenue for the company.
Activision Blizzard’s strong franchises and robust financial performance of late gives its investors plenty of hope over the future. Net bookings this year are expected to rise to $8.65 billion, which is up almost 7% from the 2020s $8.09 billion. Moreover, non-GAAP earnings per share will have reached $3.70 at the close of the year, which is a 5.7% from the previous year.
On top of that, ATVI stock boasts a solid dividend profile, marked by 11-consecutive years of dividend payouts, increasing by an average of 11% in the past decade.
Gaming Stocks To Buy: Zynga (ZNGA)
Zynga is a mobile-focused video game giant which has grown swiftly in the past few years. The company has successfully monetized its core franchises and become a juggernaut in social gaming. Moreover, multiple successful acquisitions have driven its incredible financial performance of late. Additionally, the company owns many popular games such as Empires & Puzzles, CSR Racing, Zynga Poker and others. On top of that, ZNGA stock trades at just 2.3 times forward sales.
The platform’s active users continue to rise with every passing quarter. Its third quarter witnessed a 21% increase in daily active users and a whopping 120% increase in mobile monthly active users. Furthermore, year-over-year top-line growth is at an incredible 54%, while forward EBITDA estimates are over 30%. Therefore, Zynga has a bright future ahead and will continue to cement its positioning in the gaming sector.
Sea Limited (SE)
Sea Limited is one of the top consumer internet companies in the world. It owns several online businesses and boasts one of the most diverse online platforms. There are two core growth catalysts for its platform, including Shopee and Garena. Garena is an online game developer primarily active in the South East Asian region and is currently the largest contributor to Sea Limited’s revenues.
The success of Garena is driven by its immensely popular battle royale game called Free Fire. Roughly 12.8% of Sea Limited’s active gamer base were paid users during the third quarter. Moreover, they contributed a staggering $1.2 billion to its revenue. On a trailing-12-month basis, Garena has generated $4.5 billion in revenues. Thus, Garena is arguably the main catalyst for SE stock despite other profitable offerings.
Gaming Stocks To Buy: Nvidia (NVDA)
Nvidia has been using its cutting-edge computer chips to take advantage of the massive expansion of AI and its use-cases. Data centers will become its largest segment within the next four years, but its gaming business is still its bread and butter.
The company’s gaming segment has made over $10 billion in revenues in the past four quarters, close to 50% of all its revenues. Graphics processing units (GPUs) generate roughly 47% of Nvidia’s revenues, and the business will continue growing at an aggressive pace for the foreseeable future.
The rising adoption of cloud gaming can become a major growth catalyst for Nvidia. Its GeForce Now cloud gaming service boasts a user base of over 12 million. Moreover, the company uses deep learning super sampling (DLSS) technology is improving the immersion of its games. Hence, with Nvidia’s dominance in the gaming sector, I expect NVDA stock to continue soaring to new heights.
Take-Two Interactive (TTWO)
Take-Two Interactive produces one of the most famous video games on the planet. Its portfolio of games includes the famed Grand Theft Auto series, which has sold over 300 million units alone. Additionally, it owns many other intellectual properties, including Red Dead Redemption, the NBA 2K series, Borderlands and others. Moreover, the Take-Two is present across all gaming platforms, giving rise to a very sticky customer base.
Take-Two’s recent fiscal 2022 second-quarter results showed bookings of $985 million, significantly ahead of the company guidance of $815 million to $865 million. Moreover, it expects full-year bookings to fall between $3.3 billion and $3.4 billion, comfortably surpassing prior estimates.
Take-Two’s top-and-bottom-line growth will pick up the pace in fiscal 2023, beginning in April next year. So, investors should watch out for TTWO stock as it makes great strides next year.
Electronic Arts (EA)
Electronic Arts or EA is one of the biggest names in the interactive entertainment business. It is currently the second-largest video game company in terms of revenue and is a leader in the sports game genre. It owns some of the most popular sports game franchises, including FIFA, Madden, NFL and others. Moreover, the company’s acquisition of Glu Mobile indicates that the company is focusing on expanding into mobile games.
In the past few quarters, earnings results have been rocky, but its second-quarter results for fiscal 2022 were highly encouraging. Bookings during the quarter shot up 103% to $1.85 billion, and its second quarter is the company’s strongest in history. Moreover, the company expects net bookings of $7.63 billion, ahead of the consensus of $7.55 billion for fiscal 2022. Therefore, EA and EA stock has an incredible outlook ahead.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.