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 Sea Limited (NYSE:SE) 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 livestreaming their gameplay on a mobile device with integrated payment options.
Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 63
Sea Limited (NYSE:SE), headquartered in Singapore, is a prominent tech conglomerate. Through its gaming division, Garena, the company has a significant presence in the gaming industry. It is one of the most valuable esports companies in the world. Garena is a major developer and publisher of online games. Its flagship title, Free Fire, is one of the most popular mobile battle royale games worldwide. The company has a global footprint across more than 130 markets and actively engages users through esports events, including the record-breaking Free Fire World Series 2021, which attracted 5.4 million concurrent viewers.
In addition to gaming, Sea Limited (NYSE:SE) operates Shopee, one of the largest e-commerce platforms in Southeast Asia and Taiwan, and SeaMoney, a growing digital financial services provider.
In its latest update for the second quarter of 2024 ended June 30, Sea Limited (NYSE:SE) highlighted the success of its gaming and digital entertainment division, Garena. The company reported over 20% year-on-year growth in bookings, primarily driven by the popular mobile game Free Fire. The game continues to thrive because of its large and highly engaged gamer base. The company reported that throughout the second quarter of 2024, Free Fire had over 100 million daily active users. In the Q2 2024 earnings call, management shared that according to Sensor Tower, Free Fire was the most downloaded mobile game globally in the second quarter.
Additionally, Sea Limited (NYSE:SE) is set to expand its gaming offerings with the upcoming launch of Need for Speed: Mobile in Taiwan, Hong Kong, and Macau, in collaboration with Tencent and Electronic Arts. This move will allow the company to bring a high-quality game with a classic IP to its dedicated gamer community and further enhance user engagement.
In Q2 2024, Sea Limited’s Digital Entertainment segment reported bookings of $537 million, reflecting a 21% increase year-over-year. The digital entertainment and gaming division saw a rise in quarterly active users to 648 million, up 19% year-over-year, and paying users reached 52.5 million, a growth of 21.7%.
Sea Limited (NYSE:SE) has a diversified revenue model that includes three main segments: gaming and digital entertainment, e-commerce, and digital financial services. Overall, the company achieved total revenues of $3.8 billion in the second quarter of 2024, marking a 23% increase from the previous year. The company generated a gross profit of $1.6 billion, up 9.2%. As of June 30, Sea Limited (NYSE:SE) had $9 billion in cash, cash equivalents, short-term investments, and other treasury investments, representing a net increase of $364.7 million from March 31, 2024. This indicates strong financial health and growth potential.
The company’s diverse revenue streams and focus on emerging trends and customer engagement give it a strong competitive advantage, positioning Sea Limited (NYSE:SE) well for future growth. According to Insider Monkey’s database, 63 hedge funds held stakes in Sea Limited (NYSE:SE) in the second quarter of 2024. This brings SE to the 2nd spot on our list of the best gaming stocks to buy now.
Overall, SE ranks 2nd among the best gaming stocks to buy now. While we acknowledge the growth potential of SE 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 SE 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.