We recently published a list of 7 Best Gaming Stocks To Buy Now. In this article, we are going to take a look at where Electronic Arts Inc. (NASDAQ:EA) stands against the other best gaming stocks to buy now.
A Quick Look at the Gaming Industry
The gaming industry does not only provide entertainment but also drives innovation in technology and creativity. The global gaming market was valued at $249.55 billion in 2022. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 13.1% during 2023-2030 to reach $665.77 billion by the end of the forecast period. This expansion is driven by several key trends that are reshaping how games are developed and played.
The growing popularity of cloud gaming, the introduction of VR and AR technologies, and the rising interest in online gaming are some of the key trends driving market growth.
The rising interest in esports and online gaming tournaments is expected to boost consumer spending on games and contribute to market growth. Esports features teams and individual players competing in various video games. In July and August, the first-ever Esports World Cup took place in Riyadh, Saudi Arabia, attracting over 1,500 players and offering a massive prize pool of $60 million. The event spanned eight weeks and included 23 competitions across 22 different video games, such as Call of Duty and Fortnite. This tournament is part of Saudi Arabia’s Vision 2030 initiative, aimed at diversifying the country’s economy.
Emergence of Generative AI
Another key trend is the integration of generative AI in gaming. This technology allows for the creation of dynamic storylines and realistic characters that can interact with players in a more lifelike manner. Experts believe this will enhance player engagement by personalizing experiences based on individual actions. The potential for AI to craft entire game worlds opens up new avenues for creativity in game design.
According to Bernard Marr, a world-renowned futurist and author of “Generative AI in Practice: 100+ Amazing Ways Generative Artificial Intelligence is Changing Business and Society”, generative AI is revolutionizing video game development by providing tools that enable developers to create engaging content, realistic visuals, and immersive gameplay experiences. Marr believes that generative AI can help developers create vast, unique game environments through procedural generation, allowing for dynamic gameplay experiences that change with each session.
Moreover, this technology can generate music and sound effects that adapt to in-game events, enriching the overall player experience. By automating tasks like quest creation and dialogue writing, generative AI can help developers enhance storytelling and design. Marr thinks that although generative AI won’t replace human creativity, it can speed up game development and reduce costs, which is a big step forward for the gaming industry.
Methodology
To compile our list of the 7 best gaming stocks to buy now, we used the Finviz and Yahoo stock screeners to find the largest gaming companies. We also reviewed our own rankings, sifted through ETFs, and consulted various online resources. From an initial pool of more than 20 gaming stocks, we focused on the top 7 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 7 best gaming stocks to buy now are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
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).
A close up of a consumer enjoying the company’s games on their mobile device.
Electronic Arts Inc. (NASDAQ:EA)
Number of Hedge Fund Holders: 40
Electronic Arts Inc. (NASDAQ:EA) is a prominent American video game company and a major player in the interactive entertainment industry. The company develops and delivers games, content, and online services for various platforms, including consoles, PCs, and mobile devices. The company boasts a portfolio of highly acclaimed franchises such as The Sims, Madden NFL, EA SPORTS FIFA, Battlefield, Dragon Age, and Plants vs. Zombies.
On September 17, Electronic Arts Inc. (NASDAQ:EA) hosted its Investor Day event, outlining its long-term growth strategy focused on engaging large online communities and creating blockbuster interactive experiences. The company emphasized the role of AI in enhancing efficiency and transformation within its operations. EA is optimistic about sustained growth in its EA SPORTS brand. The company announced plans to introduce a new Battlefield experience with community testing set for early 2025. EA is investing in The Sims platform, with expectations of more than doubling its annual net bookings over the next five years. The company also announced a collaboration with Amazon MGM studios on a movie based on The Sims.
Management outlined plans to explore new business opportunities beyond gaming through a socially-driven EA SPORTS app, with sports content, live sports data, interactivity and gaming centered on global football. These initiatives position EA as a strong contender for future growth in the gaming and entertainment industry.
Electronic Arts Inc. (NASDAQ:EA) reported strong results for Q1 FY25, with net bookings reaching $1.262 billion, surpassing the high end of the guidance range of $1.25 billion. This growth was driven by strong performance across Madden NFL 24, FC Online, and FC Mobile. During the quarter, EA SPORTS FC attracted millions of new fans through real-world tournaments and events. The company also revealed Dragon Age: The Veilguard gameplay, which received millions of views and trended no. 1 on YouTube Gaming.
Additionally, after the quarter ended, EA SPORTS College Football 25 welcomed 5 million unique players in its first week, highlighting the franchise’s appeal.
The company’s net revenue for its fiscal first quarter of 2025 was $1.66 billion, with a healthy cash flow from operations amounting to $120 million. Electronic Arts Inc. (NASDAQ:EA) is actively returning value to shareholders by repurchasing shares and paying dividends. During Q1 2025, the company repurchased 2.8 million shares for $375 million, bringing the total for the trailing twelve months to 10.2 million shares for $1.35 billion. The company also declared a quarterly cash dividend of $0.19 per share.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 40 hedge funds held stakes in Electronic Arts Inc. (NASDAQ:EA). As of June 30, D. E. Shaw holds 1.39 million shares of the company, valued at $193.72 million, making it EA’s most prominent shareholder.
The company has managed to grow its net income at a compound annual growth rate (CAGR) of 25% over the past ten years. Electronic Arts Inc. (NASDAQ:EA) ranks among the top 5 on our list of the best gaming stocks to buy.
Overall, EA ranks 5th among the best gaming stocks to buy now. While we acknowledge the growth potential of EA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than EA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
