The video gaming industry, while robust, is facing some serious challenges. The slowdown in consumer spending, market saturation, and uninspiring video game titles have dampened the industry’s position. Moreover, though it’s one of the fastest-growing segments in entertainment, video gaming isn’t immune to market saturation and fierce competition. Hence, it’s probably time to think about the right video game stocks to sell.
Recent data shows a concerning trend, with U.S. video game sales dipping 3% year-over-year (YOY) in April, totaling $4.1 billion. This decline was led by a 43% drop in hardware sales, which fell to $208 million. Meanwhile, video game content sales were up just a modest 2% to $3.74 billion. The gaming hardware sector overall has plummeted at least 26% on a YOY basis. With these concerning stats, here are three video game stocks to offload now.
GameStop (GME)
GameStop (NYSE:GME) investors are reeling following upwards of a $6.4 billion loss in market cap since the peak of the latest meme stock rally. Fueled by the re-emergence of the social media influencer, ‘Roaring Kitty, ‘ GME stock witnessed a sharp rise in value along with other meme stocks.
However, the temporary buzz around GME stock has done little to mask the underlying problems of its business. Online gaming sales have risen at a breathtaking pace, outpacing growth in physical sales. Though GameStop has looked to reinvent its business in line with industry trends, its efforts so far haven’t borne much fruit.
As a result, revenue change is firmly in the negative at -11%, behind its 5-year average loss of -7%. Hence, the outlook remains remarkably bleak, with social media hype as its only lifeline. Therefore, serious investors should avoid GME stock at all costs to lower their downside risk.
Electronic Arts (EA)
Electronic Arts (NASDAQ:EA) is a popular video game publisher known for its array of classic titles, which have garnered a massive following. Despite operating a consistent business over the years, it is now in unfamiliar territory. The transition from legacy titles to new endeavors poses serious questions about its future growth trajectory.
Though its popular franchises, such as EA Sports FC (formerly FIFA) and Apex Legends, remain profitable, their aging appeal presses the need for fresh intellectual properties. The shift to EA Sports FC, in particular, poses long-term uncertainties, especially once FIFA aligns with a new partner.
In the meantime, EA’s investors are facing the brunt of the company’s testing transition phase. Its fourth-quarter report showed sales of $1.67 billion, down roughly 14.4% YOY, while messing estimates by a whopping $104.9 million. In addition, a lackluster fiscal 2025 forecast and broader market challenges are causing this stock to be poised to diminish shareholder value in the foreseeable future.
Corsair Gaming (CRSR)
Corsair Gaming (NASDAQ:CRSR) is a commanding player in the gaming and streaming component industry. With a dominant position in its niche, it operates a relatively consistent business, posting healthy top-line growth. However, the recent market headwinds have led to a marked slowdown in its operational results.
Its recently released Q1 results showed a 4.7% dip in revenues to $337.3 million on a YOY basis while missing estimates by $25.5 million. This represents another quarter where it handily missed estimates on both lines. Moreover, it posted an earnings-per-share of nine cents in Q1, missing estimates by five cents.
Looking ahead, Corsair’s outlook for the rest of the year is that it will bank heavily on the success of its peripheral sales and upcoming product launches. Though its management expressed optimism over its performance at the back end of the year, the estimates seem misaligned with current trends. Moreover, with the intense competition in the sector, investors in Corsair stock stand to lose more money.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
