The gaming industry has seen remarkable growth recently, driven by a rising global audience and new monetization avenues. Yet, many gaming stocks have lagged behind the broader market. For instance, the Global X Video Games & Esports ETF (NASDAQ:HERO) has returned just over 8% year-to-date (YTD). Meanwhile, the S&P 500 index and Nasdaq 100 have surged more than 17% and 19%, respectively, in 2024.
Despite this underperformance due to intense competition affecting profitability and growth, several key players are well-positioned to benefit from the sector’s expansion. The gaming sector is expected to grow at a 13.4% compound annual growth rate (CAGR) through 2030, driven by online gaming and 5G adoption. Savvy investors can target stocks ready to capitalize on these trends.
With that said, here are three top gaming stocks set to make significant gains in the coming months.
Electronic Arts (EA)
The first name on our list of gaming stocks comes from the digital interactive entertainment sector. Electronic Arts(NASDAQ:EA) develops and publishes games across consoles, PCs, and mobile devices. The company is renowned for iconic franchises like Sports FC, Apex Legends, The Sims, and Need for Speed.
For fiscal year 2024, Electronic Arts saw record cash flow levels and a 63% year-over-year (YOY) increase in EPS. However, fourth quarter results missed expectations. Total net bookings dropped 14% YOY, resulting in a 5% decline in revenue. EPS was 67 cents per share, compared to a loss of 4 cents in the prior-year quarter.
Despite challenges, Electronic Arts is adapting to shifts in player behavior. As more gamers prefer online multiplayer experiences with monetization, open worlds, and big communities, EA is focusing on live games. These games serve millions of players with content and microtransactions. Upcoming catalysts also include the release of “College Football 25” in July and a multi-title collaboration with Marvel, starting with a new Iron Man game.
In 2024, EA stock has gained nearly 5% and offers a 0.5% dividend yield. Shares are currently trading at 19 times forward earnings and 5 times trailing sales. Analysts’ 12-month median price target of $152.15 suggests a potential 7% upsidefrom current levels.
Nintendo (NTDOY)
Next, we spotlight Nintendo (OTCMKTS:NTDOY), a legendary name among gaming stocks. Renowned for its innovative consoles and iconic titles like Super Mario, Zelda, and Pokémon, Nintendo remains a fan favorite.
The company recently reported strong financial performance. For the fiscal year ending March 31, revenue increased 4% YOY to 1.7 trillion Japanese yen, despite declines in both hardware and software sales. Net profit also rose 13% YOY.
Nintendo’s Switch console has been a standout success, boosting hardware and software sales. Anticipation is high for the new Switch 2 console, which is expected to be released before March 2025. Management forecasts a 20% decline in net sales for the new fiscal year due to the transition period. However, analysts note that previous console launches have positively impacted Nintendo’s stock price. Additionally, Nintendo is expanding its brand through a collaboration with Universal Studios to create theme park attractions, enhancing visibility and generating new revenue streams.
So far in 2024, Nintendo stock has risen nearly 5% and offers a 2.5% dividend yield. Shares are changing hands at 20 times trailing earnings and 6 times sales. With over 3 billion gamers globally, Nintendo is well-positioned to benefit from this growing market. Wall Street analysts are also optimistic, with a 12-month median price target of $16.80 for NTDOY stock, implying a 24% upside potential.
Sony Group (SONY)
We conclude our discussion on gaming stocks with Sony (NYSE:SONY), another titan in the gaming industry known for its PlayStation brand and exclusive titles. The company’s game and network services generated $28.5 billion in fiscal 2023, making it Sony’s largest business segment.
In May, Sony reported fourth quarter fiscal 2023 results, with revenues of 3.48 trillion Japanese yen, up 14% YOY. EPS also increased by 35%.
Sony has been focusing on profitability through synergies and strategic mergers and acquisitions. Despite withdrawing from the bidding process for Paramount Global (NASDAQ:PARA), its strategic focus on innovation, intellectual property maximization, and emerging markets suggests future growth.
Investments in creation technologies like CMOS image sensors and game engines aim to create immersive experiences. The company expects PlayStation Plus network services to bolster income in fiscal year 2024. Speculative news suggests a PS5 Pro release this year and hints at a PS6 by 2027, promising further growth opportunities.
Despite a 2% decline this year, Wall Street is optimist regarding SONY stock. Analysts project a 12-month median price forecast of $107.10, indicating a potential 17% upside. Finally shares are trading at reasonable valuations of 18.4 times earnings and 1.3 times sales.
On the date of publication, Tezcan Gecgil 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
