Finding the best video game stock picks is part of a long-term strategy that makes sense.
Investors shouldn’t overlook the gaming market as mere child’s play. It’s a booming business valued at more than $300 billion this year. About 3 billion people play video games globally. That number is set to grow to 3.24 billion by 2024.
It’s entirely conceivable that at some point more than half of the 8 billion people on earth will be gamers making now a great time to look for the best video game stock picks.
The takeaway is clear: There’s legitimate money to be made in video games. That’s not news to most investors anyway. We’ve been hearing about the emergence of eSports and gaming as an upcoming opportunity for the last several years and the chatter is growing louder.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is one of a few tech giants whose stock has become extremely important to the overall economy.
Whether it’s through Microsoft Office, Azure, or even ChatGPT, it’s likely that you interface with its products and services regularly. Microsoft is a tech firm that touches on the vast majority of tech.
It’s a massive competitor in console gaming with Xbox Game Studios now more than two decades old.
The console wars boil down to Microsoft’s Xbox versus Sony’s Playstation with Nintendo as an also-ran. Sony is winning that battle and made $8.8 billion more in sales in 2022 than Xbox. Microsoft is not complacent to lose and is on track to buy Activision Blizzard (NASDAQ:ATVI). It’s likely to become more relevant.
So, buy Microsoft for its massive, general exposure to all things tech, video games included. The fact that Microsoft is so heavily invested in OpenAI gives it a massive stepping stone by which to elevate itself again. Video games are a nice side revenue stream.
Roblox (RBLX)
Roblox (NASDAQ:RBLX) is a platform and stock representing game creators who showcase their creations. The game allows creators to build whatever they would like.
The object is to attract users to their games, aka experiences, where they can engage with content. There are over 40 million such experiences on the platform which is primarily accessed through mobile devices. A further difference is that Roblox caters to a younger fan base.
Roblox is an interesting investment simply because it is a growth stock. That has meant that its value has fluctuated a lot over the past year as the Fed’s rate hikes have taken effect.
Last year was a difficult one for all of tech, Roblox included. This year has been much better and RBLX shares have rebounded.
Revenues, bookings, and daily average users were all up substantially in the second quarter for Roblox. That said, Roblox continues to see its losses increase. The company lost more than $550 million in the first 6 months of 2023.
Those losses are an issue and will continue to scare investors away. It’s a tentative buy as rate hikes slow and a definite buy once its losses reach an inflection point.
Tencent (TCEHY)
Tencent (OTCMKTS:TCEHY) is a mobile-gaming giant that derives significant advertising revenues from its platform. The company refers to it as value-added services but by any name it is growing.
Q2 revenues reached $20.6 billion (up 11%) and $3.7 billion in profit, up 41%. Mobile gaming is popular in China, Tencent’s domestic market. One contributing factor for their popularity is that public transport is well developed, which gives workers a lot of commute time during which to engage with mobile games.
Conversely, that’s one factor that makes mobile gaming less common in the United States.
Tencent has clearly figured out the recipe for mobile gaming success regardless. Three of the company’s new game launches from the past two years were among the top ten games for the quarter as measured by time spent in the game.
The firm’s online advertising business and its fintech business are also growing making TCEHY shares a great choice for investors seeking exposure to growth in China’s gaming market.
On the date of publication, Alex Sirois 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.
