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 NetEase Inc. (NASDAQ:NTES) 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).
Two gamers enjoying an immersive experience playing together online via their gaming console.
NetEase Inc. (NASDAQ:NTES)
Number of Hedge Fund Holders: 35
NetEase Inc. (NASDAQ:NTES) is a leading Chinese internet technology company with a strong focus on gaming, education, and e-commerce. The company has built a diverse portfolio of popular mobile and PC games that cater to both domestic and international markets. By developing in-house titles and collaborating with global partners, the company has continuously expanded its portfolio of mobile game offerings over the years.
The company is making significant strides in the gaming industry with its recently launched new games. The multiplayer survival game Once Human achieved over 230,000 peak concurrent users shortly after launch, ranking among the top five games on Steam in July. This innovative title combines supernatural elements with engaging gameplay. Shortly after an update in August, Once Human ranked at the top on Steam’s top-seller chart in 12 countries, gathering over 10 million downloads.
In late July, NetEase Inc. (NASDAQ:NTES) launched its highly anticipated battle royale game, Naraka: Bladepoint Mobile, which offers fast-paced combat and an innovative co-pilot AI system that allows players to team up with AI allies for immersive experiences. The game quickly gained popularity, reaching the number three spot on the iOS grossing chart shortly after its release, showcasing its appeal among gamers.
Additionally, the company continues to enhance its flagship titles, like Fantasy Westward Journey, which recently saw a brand new expansion pack in the second quarter to add new content and fresh gameplay.
In the second quarter of 2024, NetEase Inc. (NASDAQ:NTES) reported total net revenue of $3.5 billion, marking a 6% increase compared to the same quarter in 2023. Revenue from games and related value-added services rose by 7%, largely driven by the success of mobile titles like Identity V and Justice Mobile. Notably, mobile games contributed approximately 76.4% of the total net revenue from online game operations, highlighting their significant role in the company’s growth.
With a focus on innovation and community engagement, NetEase Inc. (NASDAQ:NTES) is expanding its presence across various genres and markets. Over the past ten years, the company has achieved a compound annual growth rate (CAGR) of 26% in its revenue, while its net income has grown at a CAGR of 20% during the same period.
NetEase Inc. (NASDAQ:NTES) is an attractive option for investors looking to capitalize on the booming mobile gaming market. Analysts are bullish on NTES. Analysts currently hold a consensus buy rating on the stock and the 1-year median price target of $114.38 set by analysts indicates a potential upside of 14.90% from current levels.
As of the second quarter of 2024, NetEase Inc. (NASDAQ:NTES) was held by 35 hedge funds, according to Insider Monkey’s database.
Overall, NTES ranks 6th among the best gaming stocks to buy now. While we acknowledge the growth potential of NTES 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 NTES 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.