Video game sales have been explosive. In 2023, sales came in at $57.2 billion, according to the Entertainment Software Association and Circana. That includes all types of gaming sales, including downloadable content, subscription spending across consoles, cloud, mobile, PC, virtual reality, gaming hardware and video game accessories. Even more impressive, that number was greater than the $56.6 billion in sales for 2022, which was solid news for some of the top gaming stocks.
“Great content is what drives the video game market, and 2023’s release slate was one of the best in industry history,” said Mat Piscatella, executive director, video games at Circana. “While mobile, console and PC platforms remain the way most people engage with gaming today, new technologies are expanding the ways people can play. The future continues to be very bright.”
Even better, there are many more games set for release this year, which could catapult sales even higher. We’re also hoping to hear more about the industry’s 800 lb. gorilla, Grand Theft Auto VI (GTA), which could crush sales expectations. Ahead of that, you may want to jump into some of the top gaming stocks — especially on dips.
Take-Two Interactive (TTWO)
After testing a high of $171.59 on GTA hype, Take-Two Interactive (NASDAQ:TTWO) plummeted to a recent low of $138.93 on the game’s delay.
Unsure of when it will see the light of day, investors have soured on the name. However, with most of the negativity now priced in, oversold shares of TTWO are a bargain. Plus, it’s slowly starting to pivot higher from over-extensions on RSI, MACD, and Williams’ %R. From its last traded price of $141.72, I’d like to see it rally back to $171.59 with patience.
Analysts at Oppenheimer also just reiterated an outperform rating on the stock, with a price target of $185. The firm noted investor anticipation for GTA VI, upcoming earnings, and a potential adjustment to fiscal year 2025 guidance. And while TTWO did announce it would cut 5% of its workforce and slash some projects as part of its cost-reduction plans, it is expected to drive about $165 million in annual cost savings.
Electronic Arts (EA)
Electronic Arts (NASDAQ:EA) is also technically oversold on RSI, MACD, and Williams’ %R. From its last traded price of $127.14, I’d like to see it retest $144.25 near term. It’s also cutting its headcount by 5% to cut costs, and just said it would raise the price of its monthly and annual EA Play subscriptions. The monthly subscription will jump by $1. The annual fee will rise $10 by May.
Earnings haven’t been too shabby for EA. In its third quarter, the company’s earnings per share was $1.07, which was 17 cents ahead of estimates. Net bookings were up 1.3% year over year to $2.37 billion. Free cash flow for the trailing 12 months came in at $2.2 billion from $1.164 billion a year earlier. Moving forward, EA expects to see EPS of between $4.21 and $4.68, which would be 54% at the midpoint from $2.88 a year earlier.
Much like TTWO, I’d use weakness as an opportunity with the Electronic Arts stock.
VanEck Vectors Video Gaming and eSports ETF (ESPO)
We can even use weakness in the VanEck Vectors Video Gaming and eSports ETF (NASDAQ:ESPO) as an opportunity. Not only does the exchange-traded fund (ETF) offer solid diversification among top gaming stocks and eSports stocks, it also does so for less than $60 a share at the moment.
Better, after pulling back from a high of about $65 to about $58, it’s just starting to pivot higher. It’s also over-extended on RSI, MACD, and Williams’ %R and could rally back to $65.
With an expense ratio of 0.59%, the ESPO ETF holds 29 top video game and eSports stocks, including Nintendo (OTCMKTS:NTDOY), Advanced Micro Devices (NASDAQ:AMD), Electronic Arts, Roblox (NYSE:RBLX), Tencent Holdings (OTCMKTS:TCEHY), and Unity Software (NYSE:U) to name a few. It also seeks to replicate the performance of the MVIS Global Video Gaming and eSports Index, which tracks the performance of stocks involved in video game development, esports, and related hardware and software, as noted by VanEck.com.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
