In this article, we look at the 6 Best Video Game Stocks To Invest In.
Video Gaming Market
According to a report by Precedence Research, the global video games market was valued at $248.52 billion in 2023 and is expected to grow to $664.96 billion by 2033, at a CAGR of 10.32%. The market is driven by the increasing adoption of Augmented Reality (AR) and Virtual Reality (VR) technologies, which provide immersive gaming experiences.
The Asia Pacific region held a revenue share of 54.14% in 2023, driven by the region’s large population, rising disposable incomes, and increasing urbanization. North America held a share of 22.43% in 2023, driven by the presence of leading console manufacturers such as Microsoft and Sony. The region is home to some of the world’s largest and most influential gaming companies, contributing to the industry’s growth.
The market is driven by the increasing adoption of cloud gaming, the introduction of VR and AR technologies, and the growing popularity of online gaming. However, the growing complexity of game development, the increasing costs, and the need for specialized skills and expertise required to develop immersive experiences are restraining the market’s growth.
Gaming Industry Struggles to Secure Investment
According to Spike Laurie, Partner at VC Hiro Capital, the gaming industry is facing a funding crisis, with investors becoming increasingly cautious about backing new projects. The bar is extremely high right now, and merely having a great game idea and a talented team is no longer sufficient to secure investment. Laurie explains that the current economic situation is tough, with interest rates rising and people’s disposable income taking a hit.
Eliana Oikawa, CEO of Wings, an investment company that finances independent game developers, agrees that the fundraising market is tight, and investors are worried about the risk of not being able to raise further rounds. Many funds are sitting on the sidelines, and the collective caution has become self-fulfilling. We’re being very selective about what we’re backing, and we’re looking for companies that have a unique value proposition and a clear path to profitability.
Patrick O’Donnell, Video Gaming Analyst at Goodbody Equity Research, notes that the current situation in the game industry is very challenging. O’Donnell explains that there is a lot of competition, and it’s harder for new games to break through. We’re looking for companies that have a clear entrepreneurial approach and the ability to validate from users or the market early and often. The industry needs to focus on business essentials and make more money than it needs to spend.
The global video games market is poised for significant growth, driven by the increasing adoption of AR and VR technologies, cloud gaming, and online gaming. However, the gaming industry is facing a funding crisis, with investors becoming increasingly cautious about backing new projects. With that in context, let’s take a look at the 6 best video game stocks to invest in.
Our Methodology
For this article, we sifted through ETFs and online rankings to compile an initial list of 15 video game stocks. From that list, we shortlisted the stocks that were the most widely held by hedge funds, as of Q2 2024. The hedge fund sentiment was sourced from our database of 912 elite hedge funds.
Note: We only included companies whose primary business focus is on gaming.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
6 Best Video Game Stocks To Invest In
6. Playtika (NASDAQ:PLTK)
Number of Hedge Fund Investors: 19
Playtika (NASDAQ:PLTK) is an Israeli mobile gaming company known for its portfolio of social casino games and casual games. The company utilizes data-driven tools to enhance user engagement and offers in-app purchases for its games. Playtika (NASDAQ:PLTK) is known for titles such as Slotomania and Bingo Blitz, which have garnered a large following.
As a key player in the mobile gaming sector, the company continues to explore acquisitions and expansion in the global market. On September 18, Playtika (NASDAQ:PLTK) entered into an agreement to acquire SuperPlay, a mobile gaming company, for a potential price of up to $2 billion. The acquisition is expected to contribute $340 million in revenue in the first year and grow at a rate of 50% in the next year, followed by 40% growth in the subsequent two years. The acquisition will also lead to lower overall margins, with adjusted EBITDA margins expected to drop to 25%.
Playtika (NASDAQ:PLTK) is currently trading at a relatively attractive valuation, with a price-to-earnings ratio of 8.10, which represents a 41.87% discount to the sector median of 13.94. Analysts forecast the company to grow its earnings by 13.13% this year and have a consensus on the stock’s Buy rating, with a median price target of $9.59, which suggests a potential upside of almost 18% from current levels. As of the second quarter 19 hedge funds own stakes in the company valued at $99.61 million. AQR Capital Management is the largest shareholder in the company and owns shares worth $61.67 million, according to Insider Monkey’s hedge fund database.
5. Bilibili (NASDAQ:BILI)
Number of Hedge Fund Investors: 25
Bilibili (NASDAQ:BILI) is a Chinese online entertainment platform that provides a wide variety of content, including anime, comics, and games. It is popular among younger audiences and has a strong community-based approach, allowing users to interact through comments and contributions.
Bilibili (NASDAQ:BILI) has expanded its offerings into live streaming and mobile games, monetizing its platform through a combination of advertising, subscriptions, and in-app purchases, which has rapidly grown the company into a prominent player in China’s entertainment industry.
In Q2, Bilibili’s (NASDAQ:BILI) revenue from the mobile games business increased 13% year over year to $143.62 million, driven by the launch of new exclusively licensed games, The company’s revenue from the advertising business increased 30% year over year to $290.66 million and gross margin expanded by 6.8 percentage points year over year. The company’s net losses were narrower than expected, and the company is forecasted to report positive normalized earnings by the third quarter. Bilibili’s (NASDAQ:BILI) near-term top-line growth prospects are strong, driven by the growth of its mobile games business and advertising business. The company’s deferred revenue increased by 25% quarter over quarter to $531.26 million.
Bilibili (NASDAQ:BILI) presents a compelling investment opportunity based on its strong top-line growth prospects and favorable profitability outlook in the coming quarters. Industry analysts have a consensus for the stock’s Buy rating, with a median price target of $22.92, which suggests a potential upside of 22% from current levels. As of the second quarter, 25 hedge funds own stakes in the company valued at $483.57 million.
4. NetEase (NASDAQ:NTES)
Number of Hedge Fund Investors: 35
NetEase (NASDAQ:NTES) is a leading Chinese technology company specializing in online services, with its core business in gaming, education, and e-commerce. The company’s gaming division develops and publishes popular mobile and PC games, both domestically and globally. NetEase (NASDAQ:NTES) has published more than 100 game products and is known for partnerships with major gaming companies such as Blizzard Entertainment.
NetEase (NASDAQ:NTES) has a strong pipeline of new game releases and recently launched new games, including Naraka: Bladepoint Mobile, in China in July, which received positive reviews. Additionally, the company’s Hero Shooter and Marvel Rival have also received positive feedback from players. The company has also launched Marvel Rivals on PlayStation 5 and Xbox Series X|S in addition to PC.
NetEase’s (NASDAQ:NTES) financial position is outstanding, with almost $19 billion in cash and equivalents against almost no debt. This financial strength allows the company to invest in R&D efforts and experiment with new game releases. The company’s financial strength and strong pipeline of new game releases make it an attractive investment opportunity. Industry analysts have a consensus for the stock’s Buy rating, with a median price target of $115.34, which suggests a potential upside of almost 20% from current levels.
As of the second quarter, 35 hedge funds own stakes in the company valued at $993.75 million. According to Insider Monkey’s hedge funds database, Orbis Investment Management is the largest shareholder, with stakes worth $182.28 million.
3. Electronic Arts (NASDAQ:EA)
Number of Hedge Fund Investors: 40
Electronic Arts (NASDAQ:EA) is one of the world’s largest video game companies known for developing hit franchises like FIFA, Madden NFL, and The Sims. The company operates across various gaming platforms, including consoles, mobile devices, and PCs.
Electronic Arts (NASDAQ:EA) leverages microtransactions and subscriptions to enhance user monetization. In its Investors Day, management outlined several operational highlights, including its plans to double its total audience to over a billion people in the next five years, with Sims being a key element of this. Additionally, the company’s adoption of AI is expected to be financially accretive.
The company’s Investor Day also highlighted its progress in developing a Sims movie, which is expected to significantly contribute to its ecosystem. The Sims culture is being kept alive, and Electronic Arts (NASDAQ:EA) is exploring new ways to expand its reach, including a potential partnership with Margot Robbie’s production company. Furthermore, the company’s business is expected to benefit from the growing demand for sports video games, with a socially driven experience being developed with its new EA Sports App. This aligns with the company’s trend to bridge out of pure video gaming and into a broader focus on entertainment, which analysts believe is headed toward community development to create network effects and support its financial growth.
According to a report by Fortune Business Insights, the global esports market size was valued at $2.06 billion in 2024 and is projected to grow to $9.29 billion by 2032, exhibiting a CAGR of 20.7%. Electronic Arts (NASDAQ:EA) is poised for significant growth and expansion, driven by its strategic plans, leveraging AI technology, and capitalizing on the rising demand for sports video games, which solidify its position as a leader in the market and makes it an attractive investment opportunity
Analysts forecast the company to grow its earnings by 9.75% this year and have a consensus for the stock’s Buy rating, with a median price target of $159.24, suggesting a potential upside of almost 9.6% from current levels. As of the second quarter, Electronic Arts’ (NASDAQ:EA) stock is held by 40 hedge funds for stakes worth $819.77 million. According to Insider Monkey, D E Shaw is the largest shareholder in the company and owns stocks worth $193.72 million.
2. Take-Two Interactive (NASDAQ:TTWO)
Number of Hedge Fund Investors: 48
Take-Two Interactive (NASDAQ:TTWO) is a leading American video game company known for publishing popular titles like Grand Theft Auto, Red Dead Redemption, and NBA 2K. The company operates through two key labels: Rockstar Games and 2K Games.
As the video game business model has evolved over the years, Take-Two Interactive (NASDAQ:TTWO) has successfully adapted to these changes. The company has developed a proven business model that relies on franchise titles and microtransactions to generate revenue. Take-Two Interactive’s (NASDAQ:TTWO) focus on high-quality storytelling, and immersive gameplay has made it a favourite among gamers. The company also offers live gameplay, which offers recurring revenue through in-game purchases and downloadable content. The rising cost of developing AAA games is a concern. However, Take-Two Interactive (NASDAQ:TTWO) has offset this cost by relying on its franchise titles and microtransactions.
Take-Two Interactive (NASDAQ:TTWO) has a proven business model and valuable intellectual properties, the company’s Grand Theft Auto 6 (GTA 6) is expected to release in 2026 and the company has forecast $8 billion in revenue and $1 billion in operating cash flow for FY2026.
Industry analysts have a consensus for stock’s Buy rating, with a median price target of $180.55, suggesting a potential upside of almost 16.48% from current levels. As of the second quarter 48 hedge funds own stakes in the company valued at $2.36 billion. According to Insider Monkey’s hedgefund database. Tiger Global Management LLCis the largest shareholder, with stakes worth $877.51 million.
1. Roblox (NYSE:RBLX)
Number of Hedge Fund Investors: 54
Roblox (NYSE:RBLX) is an American technology company that offers an online platform where users can create and play games. The company’s platform allows players to build immersive worlds using its developer tools.
With a massive user base, particularly among younger audiences, Roblox (NYSE:RBLX) generates revenue through in-game purchases and its virtual currency, Robux. The company has become a major player in the gaming and entertainment industry and plans to expand into new content categories, such as virtual concerts.
Roblox (NYSE:RBLX) is now pushing into advertising with the opportunity for native ads within gameplay with the recent addition of video ads and a shopping test with Walmart and ELF Beauty. Roblox (NYSE:RBLX) remains a promising investment, with potential for 20% growth, bolstered by new advertising and shopping initiatives.
As of the second quarter 54 hedge funds own stakes in the company valued at $2.46 billion. ARK Investment Management is the largest shareholder in the company with stakes worth $496.33 million, according to Insider Monkey.
While we acknowledge the potential of Roblox (NYSE:RBLX) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RBLX but that trades at less than 5 times its earnings check out our report about the cheapest AI stock.
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