The long-term potential of gaming and esports stocks is a product of impressive expected growth in the esports market. The global esports market was valued at $1.44 billion in 2022. It is expected to grow to a value of $5.48 billion by 2029. That equates to a compound annual growth rate of 21% over that period.
It’s no wonder then that investors are highly interested in identifying the best publicly-traded companies in the space. They’re almost guaranteed to produce annual growth rates at that rate or higher.
Indeed, there are a few clear approaches to investing in esports overall. There are big, obvious firms that dominate gaming, lesser-known international names, and more balanced ETF options.
Accordingly, here are the three top gaming and esports stocks on my list right now.
Kicking off this list of gaming and esports stocks is none other than Nvidia (NASDAQ:NVDA). Indeed, NVDA stock has had an incredible run in 2023. Its shares began in 2023 trading for $143. Any investor would have been very happy to have bought in then, because those shares now trade for around $286 apiece.
Even though NVDA shares are nearly fully-priced, I don’t think that their upward trajectory is likely to stop anytime soon. Nvidia has caught on fire again, this time because of the strong emergence of AI. Nvidia has been identified as one of the leading AI firms, especially in the enterprise realm. That has caused an influx of investor capital, leading to a re-pricing that simply disregards traditional valuation metrics.
In short, Nvidia’s AI connection is giving it a refreshed perception across the market that’s likely to remain for some time, given how new AI still is.
But I digress. We were here to talk about gaming. That’s also where Nvidia is very strong. The company is the leader in computer graphics and has been dominant in the graphics processor unit (GPU) market for some time. That strongly implies that Nvidia has yet another growth vector over the medium- to long-term.
NetEase (NASDAQ:NTES) is a Chinese PC and mobile gaming giant worth considering. It is a dominant force in gaming in China, partnering with Blizzard Entertainment and Mojang AB in operating some of the most popular international games.
The long-term potential in NetEase isn’t necessarily immediate growth. Revenues grew by 4% in the most recent quarter. Thus, the opportunity with NTES stock is arguably more around the ability of the company to continue leveraging its massive scale and profitability to capitalize on emerging trends.
NetEase reported $3.7 billion in Q4 revenues, and has seen impressive margin explosion as well. The company managed to squeeze $1.9 billion in profit from those sales. So, it’s reasonable to assume that NetEase can use that power to either scale its business, or throw money at emerging trends it sees as worthy.
NTES stock is also attractive in that it offers a quality dividend and a strong history of share repurchases. The company completed a $3 billion repurchase in February after commencing a $5 billion repurchase program a month earlier.
Skillz (NYSE:SKLZ) is certainly inexpensive, risky, and one of the few pure-play esports stocks available to investors. That makes it inherently interesting. The company offers a software platform where gamers compete in mostly mobile games. Skillz offers tournaments, leagues and player rating features. All of this is used to match competition across the platform.
The company understands the basic opportunity in esports and gaming competition. Gamers want a chance to play against the best players globally. And Skillz wants to make money from the $2.4 billion marketplace, for which it has built a platform.
But at the same time, Skillz lost nearly $440 million in 2022. Further, revenues declined by 29%, falling to $269.7 million for the year. Yet, the stock trades for less than $1 apiece, making it interesting due to its potential long-term upside.
On the date of publication, Alex Sirois 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.