The video game industry has suffered in the past year along with most other sectors, but that doesn’t mean there aren’t a few great companies worth adding to your portfolio right now.
Investors looking for a few gambling stocks that could make good long-term investments need look no further than: Take-Two Interactive (TWO 0.72%), Electronic art (EA 0.98%)and Microsoft (MSFT) -0.09%). This is why.
1. Take-Two Interactive
If you’re not familiar with Take-Two, you might recognize some of the company’s tentpole gaming franchises, including Grand Theft Autoto be red death series and that of the company NBA 2K series.
Each of those franchises has been wildly successful for Take-Two over the years, but the company is keeping an eye on the future. And one of the key steps to building its future came just a few months ago when Take-Two bought mobile gaming company Zynga for $12.7 billion.
That’s a hefty price tag for any company to spend, but the deal not only gives Take-Two ownership of Zynga’s mobile games, but could also help the company transition some of its most popular franchises to a mobile environment.
The company says the acquisition will create $100 million in annual cost synergies within the first two years of its closing (which happened on May 23) and will generate an estimated $500 million in annual net bookings over time.
And the deal is already paying off based on Take-Two’s fiscal 2023 first quarter results (reported Aug. 8). The quarter included 39 days of Zynga ownership; net sales for Take-Two increased 36% year-over-year to $1.1 billion; and net bookings were up 41% to $1 billion.
With the acquisition, Take-Two now expects up to $5.9 billion in revenue for fiscal year 2023, an increase of more than 68% from 2022.
With Take-Two’s strong lineup of existing titles and the recent acquisition of Zynga, investors may want to consider owning some shares of these gaming stocks now.
2. Electronic Art
Electronic Arts started way back in 1982 and the company has been a household name in the game world for years. It has also managed to become one of the best video game stocks on the market over its long history.
To give you an idea of how successful EA is in the gaming world, consider that only one of the leading titles — FIFA — had 150 million user accounts in fiscal 2022 (which ended March 31). That’s just one game, and it came in the same year that EA won over 90 awards for its total collection of game titles.
Except for FIFAthe company also has a successful franchise collection that includes: The Sims, Battlefieldand Madden NFL. The combined titles helped EA become the second-largest gaming company by revenue, with revenue growing 24% in fiscal 2022 to nearly $7 billion.
In addition, net bookings increased 21% to $7.5 billion by 2022, and EA expects this figure to rise to $8.1 billion by 2023.
Part of the company’s success is due to its recent focus on mobile gaming. Last year, EA bought Glu Mobile to expand its mobile gaming presence. The move has paid off immensely, with EA’s mobile bookings coming in at $1.05 billion in fiscal 2022, up 47% from 2021.
With EA’s leadership position in sports games, success with other major titles, and the company’s strong growth in mobile gaming, EA looks like a solid long-term betting bet.
Microsoft is, of course, known for its PC software and its Azure cloud computing service, but the company’s Xbox gaming division also plays an important role for the company.
Microsoft makes its gambling money from the sale of its Xbox consoles, its game development companies and through online services, including the popular Xbox Game Pass.
The Game Pass service allows users to connect to their video games online to play with friends and to play new and old game titles through cloud gaming or downloads. There are hundreds of games on the service, and after its debut in 2017, Game Pass now has 25 million subscribers.
And it could get a huge boost soon. Microsoft is in the process of buying the gaming giant Activision Blizzard in a deal worth $68.7 billion. The acquisition still needs to clear regulatory hurdles, but Microsoft management believes it will close the deal by the end of fiscal 2023.
If so, some analysts think Activision could help Microsoft reach 100 million Game Pass subscribers in the coming years. In addition, Activision’s impressive list of game titles, including the very popular Duty series, could be a boon to Microsoft’s gaming segment.
Microsoft doesn’t necessarily need the Activision deal to continue its gaming success, but if the tech giant does indeed close the deal, Microsoft will become the third-largest game publisher.
With Microsoft’s current position in gaming and the potential to significantly expand its footprint with Activision Blizzard, investors would be wise to take a serious look at the company’s stock.
Gaming is about to level up
All of the above stocks have been going through tough times in the market lately. Most of them are in the red through no fault of their own this year. Instead, these difficult times stem from broader investor skepticism about the market and the economy at the moment.
But that negative sentiment won’t last forever. The gaming market is estimated to reach $584 billion by 2030, up from about $221 billion this year. As it grows, it is very likely that Take-Two, Electronic Arts and Microsoft will grow with it.