Here’s how to invest in the booming video game industry.
The global video game market could generate $175.8 billion in revenue, according to forecasts by gaming industry analyst firm Newzoo. That number could exceed $200 billion in 2023. Mobile gaming is a particularly strong area of growth, accounting for an estimated 52% of 2021 game revenue. Video games are becoming more immersive, realistic and advanced by the day. Online gaming communities are now major social hubs, professional esports and streaming services have become billion-dollar industries, and the gaming boom is showing no signs of slowing down anytime soon. Here are eight of CFRA Research’s top video game stocks to buy.
Nvidia Corp. (ticker: NVDA)
Nvidia produces the high-end graphics cards needed for top-level game performance, which is one of the reasons Nvidia is the chipmaker of choice for a number of professional esports leagues and top-tier streamers. Analyst Angelo Zino says Nvidia’s gaming demand is outpacing supply. The company’s 85% gaming segment revenue growth in the second quarter was driven by the company’s high-end GeForce RTX 30 series graphics cards. Zino is also bullish on Nvidia’s data center segment, which grew revenue by 35% last quarter. CFRA has a “buy” rating and a $212 price target for NVDA stock.
Electronic Arts Inc. (EA)
Electronic Arts is one of the world’s largest independent video game publishers and owner of key franchises such as Madden, FIFA and Battlefield. Analyst John Freeman projects sustained double-digit revenue growth for EA through at least 2025. He says improving virtual reality technology and next-generation consoles will be tail winds for all game publishers, including EA. VR games should also continue to gain mainstream traction. Freeman says EA has a valuable brand, a large catalog of intellectual property and unique contractual relationships with key sports leagues. CFRA has a “buy” rating and a $174 price target for EA stock.
Activision Blizzard Inc. (ATVI)
Activision Blizzard is another leading U.S. video game publisher and is the owner of franchises such as Call of Duty, Overwatch and World of Warcraft. Freeman says improving VR and console technology will continue to drive game sales growth. The video game industry will likely see a lasting positive impact from the shelter-at-home period in 2020 as well. In addition, rising disposable income in emerging markets is a long-term tail wind for Activision. Freeman says Activision has opportunities in fitness, education and other fields outside gaming. CFRA has a “buy” rating and a $101 price target for ATVI stock.
Microsoft Corp. (MSFT)
Investors are well aware of Microsoft’s professional software and cloud services businesses, but the tech giant also has a sizable gaming business. In the fiscal fourth quarter, Microsoft reported $3.7 billion in gaming revenue, up 11% from a year ago. Its next-generation Xbox consoles drove a 172% increase in gaming hardware sales in the quarter. Microsoft also plans to release the latest installment of its popular Halo series in time for the holiday season. Analyst Raymond Jarvis projects that Microsoft’s gaming revenue will grow by at least 25% annually through 2023. CFRA has a “strong-buy” rating and a $362 price target for MSFT stock.
Take-Two Interactive Software Inc. (TTWO)
Take-Two Interactive Software is a video game publisher and owner of key franchises that include Grand Theft Auto, Red Dead Redemption and Borderlands. Freeman says demand for Take-Two’s first-person shooter games should benefit from advanced gaming hardware and more computationally intense rendering capabilities. While he is bullish on Take-Two, Freeman says the stock may be a bit riskier than Activision Blizzard and EA thanks to its smaller portfolio of games and its heavy reliance on Grand Theft Auto. Freeman projects three-year compound annual revenue growth of 15%. CFRA has a “buy” rating and a $214 price target for TTWO stock.
Google and YouTube parent company Alphabet is primarily an online advertising play, but gaming content is a big part of YouTube’s success. In 2020, YouTube’s gaming segment reported more than 40 million active gaming channels and 100 billion watch time hours. Former Twitch streamers Dr. Disrespect, DrLupo, TimTheTatman and others now stream on YouTube as it works to challenge streaming leader Twitch. YouTube revenue was up 66% to $13 billion in the first half of 2021, and Freeman projects three-year compound annual revenue growth of 24% for Alphabet. CFRA has a “buy” rating and a $3,200 price target for GOOGL stock.
Amazon.com Inc. (AMZN)
YouTube has some impressive growth numbers, but Amazon.com’s Twitch dominates the world of video game streaming. In April, Streamlabs and Stream Hatchet estimated that Twitch accounted for 72% of video game streaming hours watched in the first quarter of 2021. YouTube was a distant second at 15% followed by Facebook Inc. (FB) at 12%. Twitch represents just a fraction of Amazon’s overall revenue, but its positioning as the clear streaming market leader means it is securing the lion’s share of the high-growth video game streaming market. CFRA has a “buy” rating and a $4,000 price target for AMZN stock.
Best video game stocks to buy:
— Nvidia Corp. (NVDA)
— Electronic Arts Inc. (EA)
— Activision Blizzard Inc. (ATVI)
— Microsoft Corp. (MSFT)
— Take-Two Interactive Software Inc. (TTWO)
— Amazon.com Inc. (AMZN)
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7 Best Video Game Stocks to Buy originally appeared on usnews.com
