3 Gaming Stocks Leveling Up in 2024


  • These gaming stocks can overcome the current industry downturn.
  • Unity (U): The leading graphics engine company is now focusing on profitability.
  • CD Projekt (OTGLY): The Polish game developer has pulled off a remarkable comeback after the initially disastrous launch of its Cyberpunk 2077.
  • Microsoft (MSFT): The recent Activision Blizzard acquisition adds to Microsoft’s already gigantic gaming footprint.
gaming stocks - 3 Gaming Stocks Leveling Up in 2024

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Video games are a huge growth market. Younger generations have increasingly prioritized games over video and music, with the gaming industry and gaming stocks surpassing revenues from older media forms such as music and movies.

An industry boom, however, leads to intense competition. That has happened in spades in gaming. For example, on Steam, a popular PC gaming distribution platform, annual releases have risen from hundreds or a few thousand in the mid-2010s to more than 14,000 game releases in 2023.

While gaming is an obvious long-term growth market, it is currently in a dip as record enthusiasm from 2021-2 has reverted toward more normalized levels. Which gaming stocks stand out in the current marketplace? These three are top industry picks.

Unity (U)

In this photo illustration Unity Software Inc. (U stock) logo is seen on a mobile phone and a computer screen.
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Unity (NYSE:U) has had a rough couple of years. The graphics engine operator went public amid a great deal of investor enthusiasm.

The firm has roughly 70% market share as the game engine for mobile games. It also plays a significant role in console, PC and VR/AR game engine markets. In the early days of the pandemic, people were bored while stuck at home and sought new entertainment options.

However, the video game industry experienced a sharp downturn in 2023, leading to over 9,000 layoffs industrywide—a figure far from prior years. Additionally, Unity tried to push through a major price increase to developers for licensing its engine but was forced to roll that back.

Not surprisingly, U stock lingers far below its prior highs amid investor apathy. However, things are set to improve.

The gaming industry will likely pick back up in 2024 after last year’s trough. Meanwhile, Unity continues its cost-cutting, and management is laser-focused on improving its profitability. Unity still has a tremendous market position in an industry with long-term secular tailwinds. And Unity’s leading position in virtual reality, such as partnering with Apple (NASDAQ:AAPL) on its Vision Pro, is another lever for upside going forward.

CD Projekt (OTGLY)

image of someone playing video games to represent gaming stocks
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Can a game publisher come back to life after an utterly disastrous game launch? Polish game developer CD Projekt (OTCMKTS:OTGLY) has answered that question in the affirmative.

The company was a well-respected developer of role-playing games. However, its Cyberpunk 2077 release was one of the most catastrophic in industry history. Falling far short of player expectations and releasing with an inordinate number of bugs and performance problems, Cyberpunk 2077 appeared set to become one of the biggest flops ever. Many investors understandably dumped CD Projekt stock and never looked back.

However, CD Projekt deserves a second chance. The company worked tirelessly to fix the game with many patches and additional content releases. Furthermore, the company just released a widely praised expansion pack for the game Phantom Liberty. Despite Cyberpunk 2077’s abysmal product launch, it has turned around entirely and become a popular and respected title.

CD Projekt’s masterful handling of this fraught situation should give investors confidence that the company can navigate the changing gaming market. And players are once again looking forward to whatever games the firm releases in the future.

Microsoft (MSFT)

Microsoft and Activision Blizzard logo on smartphone screen close-up
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A major characteristic of the gaming industry is the risk associated with individual developers. Particularly in big-budget triple-A games, it’s common for developers to invest hundreds of millions of dollars in a single title. If it works, that’s great, but when those flop, it can cause whole studios to shut down.

The best way to counteract that risk is with scale. Increasingly, only the biggest developers can take massive risks given the industry’s changing structure.

And there’s no bigger player than Microsoft (NASDAQ:MSFT). The company has a dominant place across the industry, developing games, selling consoles, offering subscription gaming services, etc. Microsoft’s unmatched resources give it access to the industry’s best talent and all the tools and levers to ensure its games stand out in a crowded marketplace.

That’s all been true for a while now. And it became doubly so following the firm’s recent $69 billion acquisition of Activision Blizzard. This gives Microsoft huge multiplayer gaming properties and a highly valuable intellectual property treasure trove. The gaming industry is rapidly changing, but there’s no doubt that Microsoft will remain a central player for many years.

On the date of publication, Ian Bezek held a long position in U stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

Article printed from InvestorPlace Media, https://investorplace.com/2024/01/3-gaming-stocks-leveling-up-in-2024/.

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