Video games remain one of the world's most popular forms of entertainment. Nearly 50 years after the release of the first video game console, the industry is stronger and more diverse than ever. According to Midia Research, the video games industry is expected to generate more than $300 billion in annual revenue worldwide by 2030, with 3.8 billion active players worldwide.
Consumers today spend more on video games than they do on going to the movies, streaming TV shows, or many other forms of entertainment, and gaming remains highly profitable for companies operating in this space, especially as the industry moves online and away from brick-and-mortar stores. GameStop (New York Stock Exchange:global).
With the industry showing no signs of slowing, we look at three video game stocks that are better equipped to weather a market downturn than GameStop.
Microsoft (MSFT)
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Microsoft (Nasdaq:MSFTMicrosoft is such a diversified company that it's easy to forget that it's also one of the largest video game companies in the world. And its acquisition of video game publisher Activision Blizzard for $68 billion last fall only made the company even bigger and more influential in the video game sector. Today, Microsoft not only makes Xbox consoles, but also publishes popular video games such as “Call of Duty,” “World of Warcraft” and “Candy Crush.”
During its first quarter earnings call, Microsoft noted that Xbox revenues grew 62% year over year, a result of its successful integration with Activision Blizzard and the benefits it received from the company's game sales. Going forward, Microsoft will be looking to develop a range of new products, including artificial intelligence (AI)artificial intelligence) into video games, deepening the user experience and making it more immersive. By buying MSFT stock, investors also gain exposure to a leading AI, cloud computing, and software company.
Microsoft shares are up 26% over the past 12 months.
Nintendo (NTDOY)
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Japanese video game company Nintendo (OTC:NTDOY) is one of the largest and best-known video game companies in the world. Its video game characters such as Mario, Zelda, and Donkey Kong are well known around the world. The company had a great year in 2023 with the release of the blockbuster animated Super Mario Bros. Movie and the release of the blockbuster new Zelda video game.
NTDOY shares have risen 26% over the past year but have fallen in recent months following reports that the company will delay the launch of its new console, the Switch 2. Nintendo has told game makers that the next version of its flagship console will be delayed until 2025. The company had originally planned to release a new version of the Switch this fall, in time for holiday shopping.
The original Switch is seven years old, and analysts have said a new version is needed. Despite its age, the Switch remains a best-seller around the world, with Nintendo projecting sales of 15.5 million units in 2024. The video-game stock has risen 26% over the past year.
Turtle Beach (listen)
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In addition to console manufacturers and game publishers, Turtle Beach (Nasdaq:listen) is a gaming accessories manufacturer based in San Diego, California. Having been around since the dawn of the video game industry in 1975, Turtle Beach is now primarily known for making headsets worn by gamers. Other products the company makes include controllers, joysticks, and even mice designed specifically for gaming.
Turtle Beach has built a passionate fanbase among gamers, which has translated into growing sales and a higher stock price. HEAR shares have skyrocketed this year, up 63% since January, and the stock has doubled in value over the past five years. Analysts rate this video game stock highly and expect further gains in the future. Currently, Turtle Beach shares have a “strong buy” rating, and the median price target for the stock is $22.20 per share, 32% higher than the current trading price.
As of the publication date of this article, Joel Bagrol held a long position in MSFT. Opinions expressed in this article are those of the author and follow InvestorPlace.com's publishing guidelines.
