Analysts expect video game revenue to hit $235.7 billion in 2022 and rise 36% to $321.1 billion by 2026. As a result, it might not be a bad idea to add a gaming stock to your portfolio. While it might be enticing to head straight to behemoths like Sony and Microsoft, more under-the-radar gaming stocks also have a lot to offer.
Advanced Micro Devices (AMD 1.30%), Take-Two Interactive (TTWO 0.59%), and Corsair Gaming (CRSR 1.83%) have all tumbled over the last year for various reasons but have promising futures. Consequently, investors have a chance to buy these stocks at a bargain and let their money work for them over the next decade.
1. Advanced Micro Devices
This semiconductor company has made a name for itself in PC and console gaming, providing graphics and processing components for businesses and gamers worldwide. However, AMD's stock has tumbled 54% since January as investors are increasingly concerned over rises in inflation, slowed consumer spending, and a potential recession. The majority of tech stocks have been similarly affected, with the PC market taking a significant hit.
Despite declines in tech, AMD's revenue has managed to stave off the worst market declines thanks to its diversified business. In addition to selling graphics and processing components to PC gamers, the semiconductor company also provides semi-custom chips for Sony's PlayStation 5, Microsoft's Xbox Series X/S, and Valve's Steam Deck.
AMD's foot in the console market lends its revenue more stability than companies that earn revenue exclusively from PC sales. For instance, the Xbox Series X/S sold a record 14.9 million units from November 2020 to May 2022, and the PS5 sold 20 million consoles from November 2020 to June 2022.
The success of these consoles led AMD to report a 70% increase in year-over-year revenue in second-quarter 2022, with its gaming segment boosting the figure with a rise of 32%. In addition, console generations tend to last seven to eight years, so AMD should enjoy the success of these gaming machines for a long while.
2. Take-Two Interactive
Take-Two is best known for its game publishers Rockstar Games and 2K, which have produced some of the world's most successful franchises, such as Grand Theft Auto, Red Dead Redemption, NBA 2K, and more. Its 2013 game Grand Theft Auto V became the most financially successful media title of all time in 2018 when its revenue hit $6 billion. As a result, its forthcoming sequel has garnered a lot of attention from the media.
The company's stock fell 12.4% between Sept. 19 and Sept. 26 when footage of the next Grand Theft Auto leaked online. Take-Two's share price has recovered moderately since then, but remains 32% down year to date. However, the company's long-term outlook is promising.
On Oct. 6, Goldman Sachs upgraded its recommendation for Take-Two to buy, citing confidence in its long-term growth. The investment firm's Eric Sheridan said its immediate situation is rocky, but content releases in 2023 and 2024 should "result in improved revenue growth and expanding margins."
Moreover, Sheridan stated that the next installment of the Grand Theft Auto franchise could provide an "upside" to operating estimates in fiscal 2025 and 2026, with Take-Two's recent venture into mobile gaming by acquiring Zynga further boosting revenue. The mobile gaming market is valued at $140.5 billion in 2022 and is likely to rise by 23.4% to $173.4 billion by 2026. As a result, Take-Two is an excellent stock to buy at a low cost in 2022 and hold for the next decade.
3. Corsair Gaming
Corsair Gaming has become a leading name in the gaming community by selling premium keyboards, mice, PC cases, and headsets. Like most of the PC market, the company has been hit hard in 2022, with its stock down 41% since January. Corsair's most recent quarter saw steep declines in revenue and profitability, reporting sales of $294 million -- down 40% year over year.
The company attributed its poor performance in 2022 to graphics processing unit (GPU) shortages. As a GPU is a vital component in building a PC, Corsair's accompanying accessories have seen a sharp decline in sales. However, a recent influx in GPU availability and a decrease in prices could help the company going forward.
Additionally, this year saw Corsair enter the laptop market with its release of the A1600 Voyager premium streaming notebook. Partnering with AMD, the laptop retails for $2,699. It's a hefty price tag, but the company expects strong sales in its third quarter. Despite how well the Voyager performs, Corsair is optimistic that the company has moved into a new market. The move provides another opportunity to grow its place in the PC industry and add more variety to its offerings.
Furthermore, the value of the gaming laptop market is expected to rise 4.5% every year for the next decade to $18.4 billion. With a return to GPU inventory boosting peripheral sales and a venture into gaming notebooks, Corsair could provide significant gains in the long term.
