The gaming industry was one of the few markets to see increased earnings throughout the 2008 to 2009 recession. Nintendo sold more than 11.2 million of its DS consoles in 2009, hitting a new record.
Meanwhile, the Entertainment Software Association president and CEO, Michael D. Gallagher, said on the gaming market at the time: "2009 and 2008 were the highest grossing years in our industry's history," and described the industry's structure as "solid."
Gaming has undergone significant changes since then, with investors wondering if the industry can provide the same recession-resistant performance it did in 2008. However, the introduction of subscriptions, microtransactions, and mobile games has only added to companies' revenue streams and given them more tools to pull from if a recession does hit.
Multiple tech and gaming stocks have dipped considerably in 2022 as inflation rises have slowed consumer spending. As a result, now might be the best time to invest in gaming stocks that are unlikely to be down for long. Here are a few of the best to buy in November.
Advanced Micro Devices
Advanced Micro Devices (AMD 1.25%) has been the backbone of the video game console market for the last two generations. The company provides the processing and graphics chips for both Microsoft's (MSFT -2.53%) and Sony's consoles.
The partnerships started with the PlayStation 4 and Xbox One in 2013 and have continued into the current PlayStation 5 and Xbox Series X/S generation. The new generation of consoles include some of the fastest-selling that Microsoft or Sony have ever had.
Sony has now shipped 25 million PlayStation 5 consoles, and the company finally seems to have a handle on the production woes that hampered the first two years of the console's life. Meanwhile, the Xbox Series X and S consoles from Microsoft crossed 15 million units sold this summer and are the fastest-selling Xbox consoles Microsoft has ever produced.
As AMD powers each company's consoles, providing by far the most expensive component, Xbox and PlayStation sales success is AMD's sales success. The new console generation is off to a flying start, but that's not the end of AMD's input. As we get closer to the midpoint of the console generation, Sony and Microsoft will be looking to introduce more powerful mid-gen console refreshes, which will each require new, more expensive CPU and GPU chips from AMD.
The future for AMD in gaming is incredibly bright.
Activision Blizzard
Activision Blizzard (ATVI) is an interesting buy because of the company's pending acquisition by video game console maker Microsoft. Although Activision Blizzard stock jumped from $65 to $82 on news of the purchase, it has slid back to $72. This is despite the fact that should the acquisition go through, investors would be guaranteed $95 per share from Microsoft.
The stock price has slipped based on investor uncertainty surrounding the acquisition. Regulators around the world are investigating the deal due to antitrust fears. However, as it's the fourth largest video game company, the game market isn't in danger of a Microsoft monopoly.
In fact, as part of Microsoft's reassurances concerning the takeover, the company has committed to keeping Activision titles like Call of Duty on Sony's PlayStation consoles. As it stands, if the acquisition is approved, an investment in Activision would yield a 32% return.
Whether or not the Microsoft deal goes through, Activision is in its strongest position in years. The company just released Call of Duty: Modern Warfare 2, which has had the biggest launch in the series' history, with over $800 million in sales over the first three days.
Similarly, Activision is enjoying one of its most successful game launches in years with the recent launch of Diablo: Immortal. The free-to-play mobile title has now earned over $300 million since its launch in June.
Microsoft acquisition or not, Activision Blizzard is an excellent buy in November.
Microsoft
Although not a gaming company at its core, Microsoft has grown to become one of the biggest players in the industry with its Xbox consoles and, more recently, its Game Pass subscription service.
Microsoft's current generation of consoles is its fastest-selling to date, but competing on units sold isn't what the Xbox division is interested in anymore. The company released its low-priced Xbox Series S console to get gamers in the door, hoping they would then subscribe to the company's low-priced Game Pass service.
Like Netflix, Game Pass provides gamers with a vast selection of games that can be played as long as they remain subscribed. The company has seen steady growth on the platform. From 2020 (the release of the Xbox Series X|S) to 2022, Game Pass subscribers have grown by 150%, from 10 million to 25 million.
Microsoft sees Game Pass as the future of gaming, and with Sony recently introducing its own competing service, it's hard to argue against that view. However, with its consoles, established subscription service, cloud gaming, and huge franchises, Microsoft is arguably best placed to lead the gaming industry's future.
