Best Gaming Stocks in 2024

Despite short-term stumbles, the gaming market is expanding rapidly, which could buoy the prices of gaming stocks.

A report by Statista says the video game market is expected to reach a market size of $282.3 billion in 2024 and grow at a compound annual growth rate (CAGR) of 8.76% between 2024 and 2027, leading to a market of $363.2 billion by 2027.

In the short term, the industry appears to be tightening things up, which will help profits over time. EA recently said it plans to trim 5% of its workforce. Sony has said it would trim 8% of its staff, about 900 jobs, and Microsoft has plans to trim 1,900 jobs from its Activision Blizzard and Xbox gaming segments.?

Despite those cuts, gaming stocks are thriving. The VanEck Video Gaming and eSports ETF (NASDAQ: ESPO), the Global X Video Games & Esports ETF (NASDAQ: HERO) and the Roundhill Video Games ETF (NASDAQ: NERD) are up more than 33.6%, 6.5%, and 8.5% over the past year, respectively.

This guide presents 10 gaming stocks for solid long-term gains, representing a diverse mix of small-cap, mid-cap and large-cap stocks. Read on to discover our top picks.?

A Closer Look at the Best Gaming Stocks in 2024

Now, let’s take an in-depth look at the best gaming stocks:

1. Microsoft – Most Diversified Gaming Stock

Microsoft’s biggest deal ever was its $68.7 billion purchase of Activision Blizzard in October. In one move, gaming became the company’s third-largest business behind Intelligent Cloud and Productivity and Business Processes. Activision will be part of the company’s Xbox platform and many of Activision Blizzard’s games will be added to Xbox Game Pass.

Xbox and Activision will be part of Microsoft’s More Personal Computing segment, which saw revenue rise by 19%, year over year, in the second quarter of fiscal 2024, to $16.89 billion.

In the second quarter of fiscal 2024, Microsoft’s revenue was $62 billion, up 18%, year over year and net income rose 33% from the previous year, to $21.9 billion. The big driver for the growth is Microsoft Cloud, which posted revenue of $33.7 billion, up 24%, year over year. However, the Activision deal also had a big impact with Xbox content and services revenue up 61% over the prior year.

With Microsoft’s steady growth, it’s easy to overlook it has a growing dividend as well. It raised the quarterly dividend by 10% last fall to $0.75 per share, the 14th consecutive year it has increased its dividend.

2. Nintendo – Best Gaming Stock for the Long-Term

Nintendo has a long line of million-selling video games, including Super Mario Brothers, the Legend of Zelda, Wii Sports, Mario Kart 8 Deluxe, and others. The stability and long-view culture of the company is shown in that it has never had large-scale layoffs and no debt. It has grown users every year since it launched the Switch console.

Through nine months in fiscal 2024, Nintendo reported revenue of JPY 1.4 trillion ($9.3 billion), up 7.7%, year over year. EPS was JPY 350.48 ($2.61), up 17.9% over the same period last year.

The company has pushed back the release of its Switch 2 gaming console until 2025 to ensure there are no shortages when it is released. Nintendo also raised its annual dividend recently by 23% to 189 yen ($1.43).

3. Sony Group – PlayStation Remains a Strong Franchise

Its ubiquitous PlayStation brand has consistently been among the top-selling video platforms in the world. Sony, through its subsidiary Sony Interactive Entertainment (SIE), expands the PlayStation brand and owns video game development studios that have included the popular games God of War and Uncharted.

Through the third quarter of 2023, Sony had JPY 3.74 trillion? ($24.9 billion) in revenue and 294.82 yen ($2.23) in EPS, rising 13.5% over the same period in 2022. The company has eight segments, but the one involving video games is the biggest seller, with JPY 1.4 trillion ($9.63 billion) in revenue, which was up 15.8%, year over year. Operating income fell nearly 50%, thanks partly to disappointing sales for Playstation 5 console sales. There is good news for the console, though, as the company has launches for Rise of the Ronin and Stellar Blade planned later this year.

Sony’s planned annual dividend equals $0.64 per share, 14.2% above what it paid in 2022.

4. Electronic Arts – Handling a Big Transition

Electronic Arts is in the midst of a multiyear transition from merely selling video game discs to delivering a live digital services experience to players. The U.S. company has sold real estate and made significant staff cutbacks to be more profitable and prepare the way for the transformation.

In the third quarter of fiscal 2024, EA reported revenue of $7.65 billion, up 3.7% from a year earlier, and net income of 1.08 billion, rising 3.8%. In net bookings, a combination of digital and physical sales which gaming companies say show a truer picture, EA reported revenue of $7.7 billion, up 7.8%, driven by strong showings by two games, EA Sports FC and EA Sports Madden NFL.

While EA’s dividend of $0.19 delivers a low yield, the company also bought $10.4 million of its own shares over the past 12 months.

5. Flutter – Making Inroads in the U.S. Market

Flutter’s main business is in gambling, with FanDuel leading DraftKings for the lucrative and growing U.S. market in sports betting. However, Flutter makes money from iGaming and is increasingly growing in prominence in game development because of its 2D games and mobile platforms. Its open-source framework is free, making it useful for developers, all the while boosting its network of recreational players.

In 2023, the company had revenue of ￡9.51 billion ($12.04 billion), up 24%, with gambling revenue climbing 23% to ￡5.7 billion ($7.22 billion) and gaming revenue rose 29% to ￡3.7 billion ($4.77 billion). The company isn’t profitable yet but it’s getting closer to that goal. Through the first six months of 2023, it reported an EPS loss of $0.20, compared to a full-year EPS loss of $2.44 in 2022, showing a narrowing.

Flutter is doing a good job of taking what it has learned in international markets and applying them to its battle for dominance in U.S. sports betting. FanDuel is the No. 1 online-sports-betting operator by gross gaming revenue, according to research firm Eilers & Krejcik Gaming. There’s plenty of room for growth. While 40 states now allow online sports betting in the U.S., two of the largest, California and Texas, do not.

6. Alphabet – Google’s Parent Is Leveraging Its?Size and Scope

With all the things that Alphabet has under its wings, it’s easy to overlook its contribution to gaming through its Google Play Store, which sells a variety of mobile games. Google’s Cloud services are also used by game developers for data management and infrastructure. Revenue grew in eight of the past nine quarters. Its recent stumbles with its AI service Gemini are embarrassing, but that is not likely to hurt the company’s long-term prospects. In fiscal 2023, the company reported revenue of $ 282.8 billion, up 10% while EPS was $5.80 compared to $4.56 in 2022. Google’s Play Store comes under the company’s Google Services segment, which brought in $76.3 billion in revenue in the fourth quarter, up 12.5%, year over year.

Most of the company’s revenue still comes from its Google Search and related advertising and this is an area that continues to grow. Google’s advertising business saw record revenue in the fourth quarter, led by Google Search and YouTube ads.

7. Sea Limited – Back on Solid Ground

Sea Limited is on target for its first profitable year. Its Garena subsidiary’s lead title, Free Fire, was the top downloaded mobile game app in the world in the third quarter. For the year, the game, which is in the style of a battle royale survival game, was the eighth-most loaded mobile game app at 127.7 million downloads. This was up from 119 million in 2022, but a long way from its 270 million downloads in 2019 and 206 million in 2020. Garena also hosts worldwide esports events, which are organized, multiplayer video game competitions.

In the third quarter, Sea Limited reported revenue of $3.3 billion, up 4.9%, year over year and a loss of $144 million, compared to a loss of $569.3 million in the same period in 2022. In Digital Entertainment, the segment that includes the company’s gaming operations, revenue was up 11.9%, year over year, to $592.2 million.

The hope is that with the company on stronger footing, it will be able to reinvest in Garena to develop titles to supplement Free Fire’s success.?

8. Capcom – Room to Grow, Developing its Intellectual Property

The industry veteran is known for video franchises such as Monster Hunter, Resident Evil, Mega Man and Street Fighter. Rising labor and development costs have forced it to raise prices, with Dragon’s Dogma 2, expected to be launched this year, priced at $69.99.

Through its latest nine months, Capcom had revenue of JPY 106.2 billion ($770 million), up 33.3%, year over year. Net income rose 46.7% over the same period in 2022 to JPY 34.6 billion ($5.2 million). The company’s arcade business is picking up after falling considerably in Japan due to COVID-19 restrictions. It’s working to parlay its intellectual properties into movies and television shows to strengthen the companies’ brands.

It’s already made itself a big player in eSports and last month wrapped up the Capcom Cup X, which included the 48 top Street Fighter 6 players across the world. One area lagging in growth is mobile games, where it has underperformed competitors in releases. One sign of progress in that field is that its mobile release of Monster Hunter Go last fall, which it collaborated on with Pokemon developer Niantic, reached 10 million downloads in less than three months.

9. Light & Wonder – Best Overlooked Gaming Stock

The U.S.-based small-cap company, formerly known as Scientific Games Corporation, is primarily focused on casino table games, from high-tech shufflers to video slot machines, while also being a cross-platform games company.

Light & Wonder is catching investors’ attention because of its consistent growth and relatively recent turn to profitability. Over the past year, its shares are up more than 60% and so far this year, they’re up more than 22%. The company finished off its acquisition of gaming software company SciPlay last year and did so while paying down its net debt.

Light & Wonder is coming off a record year for revenue with $2.9 billion in sales, up 16% and 11 consecutive quarters of consolidated revenue growth. Its three segments, Gaming (gaming machines and equipment), SciPlay, free-to-play mobile and computer-based video games and iGaming, all saw double-digit growth for the year and for the fourth quarter. After losing $176 million in net income in 2022, the company turned profitable, making $180 in net income in 2023.

10. Roblox – High-Risk, High-Reward Stock Points to More Growth

Roblox was a star after its initial public offering (IPO) on March 10, 2021, during the pandemic. Its platform enables nearly anyone to create video games and share them without coding expertise. However, when its primary users, many of them teen-aged or younger, went back to school full-time, its sales slumped, along with the stock.

It may be worth taking a second look at the stock, though, as it’s coming off a strong year with improved financials. The company makes money through advertising, membership subscriptions and? sales of its virtual currency, Robux, which users buy with real money and use to purchase accessories and special features for their game avatars. Its daily active users (DAUs), after slumping early in 2022, have climbed the past two quarters.

While in fiscal 2023, the company saw double-digit growth in revenue and bookings, it continues to lose money. It had revenue of $2.8 million, up 26% and total bookings of $3.5 million, up 23%. It posted an EPS loss of $1.87 after losing $1.55 per share in 2022. Investors were most encouraged by the company’s 2024 estimates, which pointed to 2024 revenue between $3.3 million and $3.4 million and bookings of between $4.14 million and $4.28 million.

How to Find the Best Gaming Stocks

Look for companies with long track records of success

The gaming industry is evolving fast, so it makes sense for investors to look at companies that have survived several boom-and-bust cycles. A lot of gaming companies are just now getting back to levels they enjoyed during the pandemic.

It’s not just about the dollars

Companies on the way up are improving their daily or monthly active users. The DAU and MAU numbers can show if a company’s games have a strong player base that’s consistently engaged, meaning less churn. Those numbers also inform companies of player behavior and preferences, to better develop new games and to monetize current franchises.

Other metrics that are important in showing a company’s growth potential are net bookings, which show the total value of products and services sold during a specific period, and total downloads, which can show which way a company may be headed.

Know the risks

• High-level video games take years to develop and can be expensive. Many companies are reliant on hit games, and may struggle if future games can’t follow the success of earlier titles. The companies with more successful titles can lower their costs by tweaking their popular games a little to maintain sales.
• It’s also a highly regulated industry, so monetization models and systems can be upset by regulatory changes. Loot boxes, data privacy and gambling are issues that are frequently under the microscope, so companies have to ensure compliance with national and local laws.
• Another concern is market saturation. The amount of competition in the industry makes it difficult for any one company to gain a large market share.

Where to Get Gaming Stock Tips and Insights

A good source for developing gaming stock tips is AltIndex, which is a subscription-based service that relies on artificial intelligence (AI) and alternative data to rate stocks. AltIndex regularly updates its data.?

AltIndex uses its metrics to compare similar stocks, using AI to find investment insights. Stocks are scored from 1 to 100, simplifying selections for investors.

It has more than 10,000 members and provides more than 100,000 stock insights and alerts each day and has a strong win rate of 75% from its AI stock picks.

You can try AltIndex’s Starter Plan for just $29 a month and receive stock picks directly to your email, as well many other useful features.

AltIndex has its own ranking of the best gaming stocks, which is updated with real-time share price and other details. The list uses an AI score, taken from several datasets, to show why stocks are moving and which stocks are moving. AltIndex includes web searches, customer satisfaction ratings, social media, and app downloads, to help it analyze a company.

Conclusion

Gaming stocks can provide solid long-term returns and many of them are still in the early stages of their growth cycle. Gaming is a global business, with strong growth potential in developed and emerging markets equally. The stocks in this guide are all growing revenue, many of them at a double-digit pace.?

Stocks in the sector are one way that investors can diversify their tech portfolio. Mobile gaming is expected to continue to rise and introduce new players. Gamers tend to skew toward younger age groups, so the tie-in with advertising works well because it reaches a demographic base that advertisers are seeking.

The possibilities that AI brings to lifelike gaming experiences should also invigorate the business, as well as make it easier for companies to adapt more quickly to customers’ tastes.?

References

https://www.statista.com/outlook/dmo/digital-media/video-games/worldwide#:~:text=In%202024%2C%20the%20Video%20Games,US%24363.20bn%20by%202027

https://www.wsj.com/livecoverage/stock-market-today-dow-jones-02-28-2024/card/electronic-arts-plans-to-lay-off-about-5-of-workforce-uI2e2Ii3IeuIkywkvc01

https://sonyinteractive.com/en/news/blog/difficult-news-about-our-workforce/?sf271923331=1

https://sportshandle.com/draftkings-fanduel-sportsbook-wars/

https://abc.xyz/assets/95/eb/9cef90184e09bac553796896c633/2023q4-alphabet-earnings-release.pdf

https://mobilegamer.biz/the-top-mobile-game-downloads-of-2023/

https://escharts.com/news/capcom-cup-x-success-recap

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Jim Halley

Editor

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Jim Halley

Editor

I am an experienced journalist who has also worked as an editor and writer at the Savannah Morning News, Salt Lake Tribune, USA Today, Stars and Stripes, and The Motley Fool. I spent the first half of my career in sports journalism, but in recent years have switched to writing about my other passion, stocks, particularly healthcare, real estate and consumer staples stocks. I've won numerous journalism awards from the Associated Press and state press associations and have been a judge for the Georgia Sportswriters Association. I've written one non-fiction book, Just One More Time, about Georgia Southern football, and…

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