Here’s how to invest in the booming video game industry.
The global video game market was valued at $195.6 billion in 2021 and is expected to grow at a compound annual growth rate, or CAGR, of 12.9% through 2030, according to market research firm Grand View Research. 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. Mobile gaming has been a particularly strong area of growth in recent years. Here are seven top video game stocks to buy according to CFRA Research analysts.
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 data center business has tremendous growth potential as cloud customers invest in greater processing speeds to power expanding artificial intelligence workloads. Zino says a third of Nvidia’s installed gaming user base has already upgraded to its Ampere RTX graphics processing units, or GPUs, driving 37% gaming revenue growth in the first quarter. CFRA has a “buy” rating and $350 price target for NVDA stock, which closed at $178.51 on May 26.
Advanced Micro Devices Inc. (AMD)
Advanced Micro Devices is a semiconductor producer and one of the world’s largest suppliers of PC microprocessors and GPUs. Zino says the ramp-up of AMD’s next-generation EPYC processors should help the company grow its data center market share. In addition, Zino says AMD’s GPUs have positive momentum, and the company’s impressive cash flow can improve its balance sheet. Zino says next-generation processor sales will boost gross margins, and machine learning and gaming will generate significant long-term GPU demand. Zino projects 46% revenue growth for AMD in 2022. CFRA has a “buy” rating and $120 price target for AMD stock, which closed at $98.75 on May 26.
NetEase Inc. (NTES)
NetEase is a Chinese tech stock that specializes in PC and mobile gaming, which accounts for more than 70% of its revenue. NetEase shares have been pressured by crackdowns on Chinese stocks by both U.S. and Chinese regulators. Analyst Ahmad Halim says NetEase is an excellent play on mobile gaming and streaming music in China, and the stock is undervalued. He says NetEase’s robust cash flow and healthy balance sheet allow the company to consistently invest in growth opportunities, such as e-commerce, streaming and cloud services. CFRA has a “buy” rating and $110 price target for NTES stock, which closed at $101.49 on May 26.
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 says EA’s fiscal fourth-quarter numbers were particularly impressive given the recent “spending lull” for video games. Freeman says EA’s mobile game business is performing particularly well and represented 18% of total bookings last quarter. In addition, active accounts on the EA player network grew 16% to 580 million ahead of the planned release of four games in the fourth quarter of fiscal 2023. CFRA has a “strong buy” rating and $184 price target for EA stock, which closed at $138.68 on May 26.
Sea Ltd. (SE)
Sea Limited is a Singapore-based consumer internet company. Sea’s subsidiaries include its Shopee e-commerce platform, its Garena digital entertainment business and its SeaMoney financial technology operations. Analyst Siti Salikin says Sea reported impressive revenue growth across the board in the first quarter, including 45% growth for Garena, 64% growth for Shopee and 360% growth for SeaMoney. Sea also said its game Free Fire was the most downloaded mobile game in the world in the first quarter. Salikin projects 43% revenue growth for Sea in 2022. CFRA has a “buy” rating and $160 price target for SE stock, which closed at $79.55 on May 26.
Roblox Corp. (RBLX)
Roblox is an online entertainment platform that allows creators to develop games. Roblox is essentially a video game that has 54.1 million daily active users, its own digital currency and a range of unique virtual experiences. Freeman says daily active user growth, improving demographic trends, 5G network upgrades and growing interest in coding will help Roblox maintain at least 20% annual revenue growth in the long term. In addition to its core business, Freeman says Roblox has significant opportunities to expand into digital training, education and fitness. CFRA has a “strong buy” rating and $56 price target for RBLX stock, which closed May 26 at $30.59.
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 Take-Two has a compelling pipeline of content, and its stock has an attractive valuation. In addition, he says Take-Two will benefit from several secular tail winds, including elevated player engagement, rising disposable incomes and increasing game immersion. In the near term, Freeman says Take-Two faces risks associated with its recently completed $12.7 billion acquisition of mobile gaming specialist Zynga Inc. CFRA has a “buy” rating and $171 price target for TTWO stock, which closed at $123.28 on May 26.
7 top video game stocks to buy now:
— Nvidia Corp. (NVDA)
— Advanced Micro Devices Inc. (AMD)
— NetEase Inc. (NTES)
— Electronic Arts Inc. (EA)
— Sea Ltd. (SE)
— Roblox Corp. (RBLX)
— Take-Two Interactive Software Inc. (TTWO)
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Update 05/27/22: This story was published at an earlier date and has been updated with new information.