The video game industry has enjoyed incredible growth over the last decade, and it would be a mistake to think that it's even close to maxing out its potential. Trends such as growth for the global middle class, powerful mobile hardware becoming available at lower costs, and the expanding availability of high-performance internet all point to strong momentum for the interactive entertainment industry through the next decade and beyond.

More people are taking up gaming as a hobby every day, and top companies in the space offer investors attractive risk-reward dynamics in a market that is otherwise fraught with uncertainty. Read on for a look at three top video game stocks that could deliver huge wins in 2021. 

A man holding a mobile phone and celebrating.

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1. Zynga

Zynga (NASDAQ:ZNGA) is a video game publisher that has pulled off an impressive turnaround, and it now looks poised for a winning streak. The company used to dominate the browser-based gaming market with popular franchises like FarmVille and Mafia Wars, but it struggled as the casual market shifted away from games hosted on Facebook and other web portals in favor of mobile app downloads. Zynga has since pivoted to focus almost exclusively on the mobile market, and it has posted strong performance thanks to improved monetization practices and a string of successful acquisitions. 

The gaming company has demonstrated a penchant for creating long product life cycles driven by well-timed content updates, and hit franchises in this mold typically become very profitable over the long term. With a growing stable of development studios and gaming properties under its umbrella and a great balance sheet to fund more acquisitions, the publisher hasn't looked this strong in roughly a decade.

Zynga stock has climbed roughly 62% year to date, but shares still trade at a 9% discount from the 52-week high they hit after the company published second-quarter results in July. The gaming company's stock dipped after it reported third-quarter earnings, but results from the period were much better than subsequent pricing action might suggest -- and the business looks primed for great performance over the long term.

Zynga has a market capitalization of roughly $10.7 billion, and it trades at about 26.5 times this year's expected earnings and 5.5 times expected sales. 

2. Glu Mobile

Like Zynga, Glu Mobile (NASDAQ:GLUU) is a publisher that creates free-to-play mobile games geared toward a casual audience. With a market capitalization of roughly $1.65 billion, it stands as the smallest of the major Western video game publishers, but it also has the potential to deliver big wins for shareholders. 

Glu's core franchises include Design Home, Covet Fashion, MLB Tap Sports Baseball, and Kim Kardashian: Hollywood. Admittedly, you probably won't hear any of these names come up when people are discussing the biggest hits in the video game industry. However, the company has continued to drive engagement for its core properties with new content updates, and it expects that performance for its current software lineup alone will drive bookings growth between 8% and 10% next fiscal year.

Even more intriguing, Glu Mobile will be launching four new intellectual properties in 2021. Strong performance for the company's upcoming lineup could lead to radical sales and earnings growth, and the stock is looking attractively valued, trading at roughly 24 times this year's expected earnings.

Glu has a strong balance sheet and will likely use its cash to create new titles, develop content updates, and acquire studios that can accelerate growth. The company's small size could also wind up working to the advantage of investors, as even relatively small business wins could power big stock gains.

3. Ubisoft

Ubisoft (OTC:UBSFY) stock has rebounded this year thanks to momentum from new video game console launches from Sony and Microsoft, and strong performance for its Assassin's Creed franchise. After a challenging year in 2019, the stock has rallied roughly 42% in 2020. However, shares still trade significantly below the range of the lifetime high that they hit in 2018.


UBSFY data by YCharts

There's a good chance that strong business performance in 2021 will push Ubisoft stock significantly above its previous high, and the company's long-term growth outlook remains very promising. The France-based publisher has a strong collection of core franchises and development teams, and it's primed to benefit from tailwinds shaping the broader video game industry. Investors seeking promising growth stocks at a reasonable price should take a close look at this one.

While Ubisoft has historically been mostly focused on the console and PC gaming markets, it has plenty of room for expansion in mobile, and it could find big success transitioning some of its franchises and gameplay mechanics to smartphone and tablet platforms. A heightened focus on mobile will help Ubisoft tap into a rapidly expanding global audience for video games and capitalize on encouraging engagement trends. The company will also have the opportunity to benefit from the growth of esports, with franchises including Rainbow Six and Ghost Recon being natural fits for the world of competitive gaming. 

With a market capitalization of roughly $12 billion, Ubisoft still has huge room for expansion. The company is trading at roughly 19.5 times the midpoint of the adjusted operating income range that management laid out in October, and it looks like the business is on track to significantly exceed that target. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.