The video game industry has suffered along with most other sectors over the past year, but that doesn't mean that there aren't a few great companies worth adding to your portfolio right now.
Investors looking for a few gaming stocks that could end up being good long-term investments should look no further than Take-Two Interactive (TTWO 0.25%), Electronic Arts (EA +0.08%), and Microsoft (MSFT 1.57%). Here's why.
Image source: Getty Images.
1. Take-Two Interactive
If you're unfamiliar with Take-Two, you may recognize some of the company's tentpole gaming franchises, including Grand Theft Auto, its Red Dead series, and the company's NBA 2K series.
Each one of those franchises has been wildly successful for Take-Two over the years, but the company is keeping its eye on the future. And one of its most significant steps toward building out its future came just a few months ago when Take-Two purchased the 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 also could help the company transition some of its most popular franchises to a mobile environment.
The company says that the acquisition will create $100 million in annual cost synergies within the first two years after closing (which happened on May 23) and will bring 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 on Aug. 8). The quarter included 39 days of ownership of Zynga; net sales for Take-Two were up 36% from the year-ago quarter to $1.1 billion; and net bookings spiked 41% to $1 billion.
With the acquisition, Take-Two now expects up to $5.9 billion in fiscal 2023 revenue, an increase of more than 68% from 2022.
With Take-Two's strong lineup of existing titles and its recent acquisition of Zynga, investors may want to consider snatching up some shares of this gaming stock right now.
NASDAQ: TTWO
Key Data Points
2. Electronic Arts
Electronic Arts got its start way back in 1982, and the company has been a household name in the gaming world for years. It has also managed to become one of the top video game stocks on the market over the course of that long history.
To give you some perspective on just how successful EA is in the gaming world, consider that just one of its 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 gaming titles.
Aside from FIFA, the company also has a successful franchise collection that includes The Sims, Battlefield, and Madden NFL. The combined titles have helped EA become the second-largest gaming company by revenue, with sales increasing 24% in fiscal 2022 to nearly $7 billion.
Additionally, net bookings climbed 21% to $7.5 billion in 2022, and EA expects that figure to increase to $8.1 billion in 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 footprint. The move has paid off tremendously, with EA's mobile bookings coming in at $1.05 billion in fiscal 2022, up 47% from 2021.
With EA's leading position in sports games, its success with other major titles, and the company's strong mobile-gaming growth, EA looks like a solid long-term gaming bet.
NASDAQ: EA
Key Data Points
3. Microsoft
Microsoft is, of course, known for its PC software and its Azure cloud-computing service, but the company's Xbox gaming division also plays a significant role for the company.
Microsoft makes its gaming money from sales of its Xbox consoles, its game-developer companies, and through online services that include its popular Xbox Game Pass.
The Game Pass service allows users to connect to their video games online to play with friends as well as play new and old gaming titles via cloud gaming or through downloads. Hundreds of games are on the service, and after debuting 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 has to clear regulatory hurdles, but Microsoft's management believes it will close the deal by the end of fiscal 2023.
If it does, some analysts think that Activision could help Microsoft reach 100 million Game Pass subscribers in the coming years. Additionally, Activision's impressive list of gaming titles, which includes the very popular Call of Duty series, could be a boon to Microsoft's gaming segment.
NASDAQ: MSFT
Key Data Points
Microsoft doesn't necessarily need the Activision deal in order to continue its gaming success, but if the tech giant does indeed close the deal, it'll make Microsoft the third largest game publisher.
With Microsoft's current position in gaming and the potential to greatly expand its footprint with Activision Blizzard, investors would be wise to give the company's stock a serious look.
Gaming is about to level up
All of the stocks above have suffered some tough times in the market as of late. Most of them are down in the red this year through no fault of their own. Instead, these hard times come from investors' broader skepticism of the market and the economy right now.
But that negative sentiment won't last forever. The gaming market will reach an estimated $584 billion by 2030, up from about $221 billion this year. As it grows, it's very likely that Take-Two, Electronic Arts, and Microsoft will grow right along with it.
