Gaming Stocks for Investors: A Guide to Play the Market

Summary:

Sector: Communication Services

Industry: Entertainment, Interactive Media & Services

According to Eyestock rating Top gaming stocks for investment are: GOOGL stock, MSFT stock, AAPL stock, NTES stock .

Here is a list of well-known video games companies, with Market Cap in $B and Dividend yield in percentage, so we can immediately know if the company pays dividends (more).

Introduction to Industry:

The video gaming industry is a unique realm with its own culture, heroes, and villains. To give you an idea of its immense scale, let’s look at some numbers.

All global trends and data cited here are sourced from NewZoo. For more detailed information, please check their resources.

According to their annual report, in 2023, more than 3.31 billion people worldwide played video games, which is 41% of the global population.

The global games market generated approximately $184 billion in 2023. However, the market is experiencing modest growth, with only a 0.6% year-over-year increase. This is a concerning sign, indicating that with almost half of the global population already engaged in gaming, player growth is limited. The projected market growth for 2026 is $205.4 billion, implying a compound annual growth rate (CAGR) of 2.2%.

The key geographic region is Asia-Pacific, with 1.73 billion players, compared to only 237.3 million in North America.

To understand the gaming industry better, it`s important to highlight the four key markets: Console (29% market share), Browser (1%), PC (21%) and Mobile (49%). The browser market is nearly obsolete as gaming platform, however the Console market, driven by major exclusive titles showed solid performance with $53.1 B and growth of 1.7% year-over-year growth, outpacing the overall market. PC games generated $38.4 B while Mobile games decreased to  $90.5B and decline -1.4% YoY.

Revenue distribution by region shows that 46% of the revenue comes from Asia-Pacific and 27% from North America.

The gaming industry is quite mature, evidenced by several mergers and acquisitions over the past few years. Between 2008 and 2016, Activision merged with Vivendi Games, Treyarch, Infinity Ward (the Call of Duty developer), and High Moon, ultimately forming Blizzard Activision (ATVI stock).

In the aftermath Microsoft (MSFT) has acquired Activision Blizzard (ATVI stock) and right now we have only a memory of ATVI.

So far, we can conclude that the North American and Asia-Pacific regions, along with the console segment, likely represent the best combination for the gaming industry over the next three years.

Let’s take a look at NewZoo’s list of gaming companies filtered by revenue to identify those providing significant exposure, particularly to the North American and/or console markets.

From the list above it is easy to outline that three companies out of ten represent the famous Magnificent7: 

• Google (GOOGL): 128% High
• Microsoft (MSFT): 128% High
• Apple (AAPL): 109% High

These are big tech companies, being a locomotive of S&P500. According to Eyestock rating these are high quality stocks, well-known to the investors all over the world.

But is it worth investing in a gaming company solely, lets have a closer look: 

• NetEase (NTES stock): 125% High
• Electronic Arts (EA stock): 79% Moderate
• Take-Two Interactive Software (TTWO stock): -33% Low
• Roblox (RBLX stock): -30% Low

The most attractive gaming stock is NetEase due to its high quality rating 125%, especially it provides exposure to Asian market, that is the only reasonable bet in a purely gaming company, operating in online multiplayer PC segment.

TTWO and RBLX are extremely risky investment. TTWO has a game publishing business, despite having great names in the portfolio like GTA V and Red Dead Redemption has very poor financial performance and ROBLOX lacks net profit and a viable business model. Check more in our Insight section, to know more about why RBLX is a strong sell 

You can have a look at Video Gaming companies in the Eyestock Stock Picks Section.