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 Roblox Corporation (NYSE:RBLX) 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 person taking lessons through Roblox Education, expanding their knowledge and skills.
Roblox Corporation (NYSE:RBLX)
Number of Hedge Fund Holders: 54
Roblox Corporation (NYSE:RBLX) is an American video game developer that ranks among the top 3 on our list of the best gaming stocks to buy now. The company developed Roblox, which is a dynamic gaming platform and game creation system that allows users to create, share, and play games developed by other users. Roblox offers free access to its extensive library of millions of games while generating revenue through in-game purchases using its virtual currency, Robux. Players can buy Robux to unlock special features, customize their avatars, and enhance their gaming experience. This model attracts a large user base and also incentivizes developers to create engaging content, as they can earn Robux that can be exchanged for real money.
The corporation aims to actively expand its platform to include various uses such as gaming, social interaction, shopping, and education. During the Q4 2024 earnings call, management highlighted that the company is venturing into e-commerce by partnering with Walmart to test real-world shopping experiences within the platform.
In Q2 2024, Roblox Corporation (NYSE:RBLX) reported impressive financial results, with revenue reaching $893.5 million, a 31% increase from the previous year. Bookings also rose by 22% year-over-year to $955 million, surpassing guidance expectations. The platform achieved a record 79.5 million average daily active users (DAUs), reflecting a 21% year-on-year growth. Hours engaged hit a record 17.4 billion, up 24% year-over-year, with significant growth in key markets like Japan and India. Additionally, in Q2 of 2023, the company’s cost to serve 1,000 hours was approximately $12.75. In Q2 2024, that cost decreased to $9.61, representing a 25% fall year-over-year.
The company continues to focus on enhancing its user-generated content ecosystem, which attracts a diverse audience. Roblox Corporation (NYSE:RBLX) is investing in creating better experiences for its creator community while also expanding into new areas.
According to Insider Monkey’s database, 54 hedge funds held stakes in Roblox Corporation (NYSE:RBLX) as of the second quarter. Among these, ARK Investment Management stands out as the largest shareholder in RBLX, with stakes worth $496.33 million.
Overall, RBLX ranks 3rd among the best gaming stocks to buy now. While we acknowledge the growth potential of RBLX 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 RBLX 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.
