Please ensure Javascript is enabled for purposes of website accessibility

This Industry Will Outperform the Market for Years to Come

By Neil Rozenbaum - Jun 5, 2021 at 11:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

You can't ignore the gaming world anymore.

In this video, I will be talking about the gaming industry and why I believe this industry will outperform the market in the years to come.

The gaming market

When we think about gaming, it's not just video games anymore. It's everything from graphics cards -- AMD (AMD 2.82%), NVIDIA (NVDA 3.93%), and Intel (INTC 1.02%) -- to streaming to in-game purchases. Today, 45% of U.S. gamers are women. The average age of a gamer is 34. And the average household has two gamers. In fact, women represented around 65% of the total mobile gaming population and were observed to spend more on in-game purchases than male gamers.

Millennials became the largest generation in 2016. In 2021, they'll hit their peak purchasing power and will be the prime gaming demographic. 

Now let's talk numbers. U.S. video game spending increased 30% in Q1 2021. Gamers downloaded around a billion titles every week in the quarter, up 15% year over year with games such as Among Us, Nintendo's Animal Crossing: New Horizons, and Call of Duty: Black Ops Cold War among the best-selling and most-played games for the quarter. Google Play game downloads grew 20% year over year to 11 billion, while total consumer spend on gaming hit $22 billion. iOS gamers spent the most at $13 billion, up 30% year over year, while gamers spent $9 billion on Google Play, up 35%.

In-game cosmetics

Gaming over the past two decades has also given rise to live-service games, which are often free to play and are typically monetized via skins for in-game avatars. Brands are finding that in-app gaming experiences are a successful form of monetization. For example, Louis Vuitton announced in-game skins for League of Legends in 2019, which proved to be a popular cosmetic item for gamers. Fortnite, which is in the spotlight right now with the Epic Games v. Apple trial, has previously partnered up with Air Jordan, the NFL, soccer teams, and most recently Neymar Jr to bring real-world items into the game. 

It's usually a win-win for the game and the brand. The most popular games, including Fortnite, Roblox, League of Legends, and Call of Duty, feature skins prominently. Big spenders called "whales" spend, on average, more than $15 a month on skins. The whales tend to be older. Almost 80% of Fortnite's recent players engage with its cosmetics in some way.

Streaming

According to Newzoo, there are 2.7 billion gamers, and that number is expected to surpass 3 billion in the next three years. NVIDIA estimates the number of Twitch streamers doubled in 2020, while Corsair (CRSR 3.85%) estimates that there were 6 million committed streamers last year. This growing market should support demand for Corsair's streaming products, such as microphones, streaming decks, and studio accessories. There's a reason why the stock has more than doubled since the pandemic started. 

How can you invest?

There are various ways to get exposure to the gaming industry. The obvious ones are the gaming companies and publishers such as Electronic Arts (EA 1.26%), Activision (ATVI 0.36%)Nintendo (NTDOY -0.39%)Tencent (TCEHY -1.61%), Take-Two Interactive (TTWO 1.93%), or platforms such as Roblox (RBLX 2.71%) and Unity (U 7.53%). Then you have Sony (SONY 0.69%) and Microsoft (MSFT 1.33%), who make two of the most popular consoles on the planet, the Xbox and Playstation as well as various games. 

You could also get exposure outside of the U.S. by looking at companies like Bilibili (BILI 0.46%), Huya (HUYA 2.86%), or the great Singaporean internet company Sea Limited (SE -0.54%), which owns Garena, the maker of Free Fire (one of the most popular games today). 

But if you don't want to pick individual stocks you could go the ETF route with VanEck Vectors Video Gaming and eSports ETF (ESPO 0.97%) or Global X Video Games & Esports ETF (HERO 0.86%), which are the two biggest ones that will get you exposed to most of the above-mentioned stocks. 

During Netflix's (NFLX 2.26%) Q4 2018 earnings report, the company said its biggest competitors weren't other streaming platforms but video games like Fortnite. No wonder Netflix wants a piece of the video game market. 

Watch the video below to get the full insights.  

*Stock prices used were the closing prices of June 3, 2021. The video was published on June 4, 2021.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Neil Rozenbaum has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Activision Blizzard, Bilibili, Microsoft, NVIDIA, Netflix, Sea Limited, Take-Two Interactive, and Tencent Holdings. The Motley Fool recommends Electronic Arts, HUYA Inc., Intel, Nintendo, and VanEck Vectors ETF Trust-VanEck Vectors Video Gaming and eSports ETF and recommends the following options: long January 2023 $115 calls on Take-Two Interactive, long January 2023 $57.50 calls on Intel, and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy. Neil is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
NVDA
$186.47 (3.93%) $7.05
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$290.83 (1.33%) $3.81
Intel Corporation Stock Quote
Intel Corporation
INTC
$35.95 (1.02%) $0.36
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$248.18 (2.26%) $5.48
Electronic Arts Inc. Stock Quote
Electronic Arts Inc.
EA
$131.31 (1.26%) $1.63
Sony Corporation Stock Quote
Sony Corporation
SONY
$86.41 (0.69%) $0.59
Nintendo Co., Ltd. Stock Quote
Nintendo Co., Ltd.
NTDOY
$53.73 (-0.39%) $0.21
Take-Two Interactive Software, Inc. Stock Quote
Take-Two Interactive Software, Inc.
TTWO
$123.00 (1.93%) $2.33
Advanced Micro Devices, Inc. Stock Quote
Advanced Micro Devices, Inc.
AMD
$100.89 (2.82%) $2.77
Tencent Holdings Limited Stock Quote
Tencent Holdings Limited
TCEHY
$38.40 (-1.61%) $0.63
Activision Blizzard, Inc. Stock Quote
Activision Blizzard, Inc.
ATVI
$80.80 (0.36%) $0.29
Bilibili Stock Quote
Bilibili
BILI
$25.32 (0.46%) $0.12
HUYA Stock Quote
HUYA
HUYA
$3.42 (2.86%) $0.10
Sea Limited Stock Quote
Sea Limited
SE
$88.10 (-0.54%) $0.48
Unity Software Inc. Stock Quote
Unity Software Inc.
U
$58.34 (7.53%) $4.08
Corsair Gaming, Inc. Stock Quote
Corsair Gaming, Inc.
CRSR
$17.52 (3.85%) $0.65
Roblox Corporation Stock Quote
Roblox Corporation
RBLX
$50.90 (2.71%) $1.34
Global X Funds - Global X Video Games & Esports ETF Stock Quote
Global X Funds - Global X Video Games & Esports ETF
HERO
$22.88 (0.86%) $0.20
VanEck Vectors ETF Trust - VanEck Vectors Video Gaming and eSports ETF Stock Quote
VanEck Vectors ETF Trust - VanEck Vectors Video Gaming and eSports ETF
ESPO
$51.90 (0.97%) $0.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
389%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.