When was the last time you played a video game? Some people haven’t played them in a while, but there is a big demand for the industry. Approximately 3.09 billion people play video games, and that number is expected to reach 3.32 billion in 2024. This will have big implications for gaming stocks.
The large fanbase has helped many video gaming giants soar to new heights and reward long-term investors. The business model is also evolving. It’s more than just a video game. Corporations can make money from merchandise, TV shows, movies, music, and other assets that stem from the original games.
If you haven’t played in a while, it’s time to dust off the controllers and take a look at three gaming stocks that can deliver gains for your portfolio.
Nintendo (OTCMKTS:NTDOY) has been producing video games for several decades and has become a household name across multiple generations. There’s even meaningful debates about whether Mario is more popular than Mickey Mouse.
Revenue growth took a backseat in 2023, but a potential Nintendo Switch 2 can reignite growth within the company. Nintendo and other gaming giants also have a tremendous opportunity with movie adaptations.
The Super Mario Bros movie grossed over $1 billion and offers some insight into what future Nintendo movies can do for the company. Nintendo also had a successful showing with Detective Pikachu which is set for a sequel. The Legend of Zelda franchise is also getting a movie that is currently in the works. Zelda games have been a staple since 1986. All in all, its one of those gaming stocks to consider.
Nintendo is likely to pump the gas on this business segment if the upcoming movies perform well. Nintendo has a vast library of content and can dominate the movie industry for the next 10-20 years if the corporation plays its cards right.
Not everyone thinks of Microsoft (NASDAQ:MSFT) as a gaming company due to its PCs, cloud computing, and artificial intelligence. The firm is a tech conglomerate, but a large gaming segment is a part of this vast entity. Microsoft owns Xbox which also has the potential to dominate theaters with video game adaptations.
While Xbox is sufficient to demonstrate Microsoft’s commitment to expanding in the gaming industry, the company made a large investment in Activision Blizzard to strengthen its market position. The Activision Blizzard acquisition took multiple years to come to fruition and cost Microsoft $68.7 billion.
That’s a lot of money to put into a single gaming company. It’s a testament to how important the industry has become and Microsoft’s commitment to maintaining its leading position.
Xbox even holds its own in Microsoft’s financials which makes the firm’s commitment to gaming even more plausible. In the first quarter of fiscal 2024, Xbox revenue increased by 13% year-over-year. That’s the same growth rate Microsoft exhibited as a company.
Electronic Arts (EA)
Electronic Arts (NASDAQ:EA) has been producing iconic games since the 1980s and is a leader in sports video games with titles like FIFA and Madden. The stock has gained 11% over the past year and is up by 50% over the past five years.
EA hasn’t exhibited high revenue growth in recent quarters. The revenue growth rate came to barely under 1% year-over-year in the second quarter of fiscal 2024 while net bookings increased by 4% year-over-year.
However, the firm’s profit margins expanded to exceed 20%. Margins grew due to the company’s 33% year-over-year increase in net income. The firm exceeded expectations through new releases and ongoing live services. Stuart Canfield, CFO of EA, expressed that the company will continue to pursue these segments to improve future earnings. This makes it one of those gaming stocks to consider.
The company recently declared a $0.19 dividend per share which puts the yield at 0.55%. EA shares trade at an 18 forward P/E ratio.