It hasn’t been all rosy, however. Indeed, the video game industry has experienced some growing pains over the last decade. Issues such as loot boxes, gambling concerns and predatory monetization schemes continue to haunt key players. Fortunately, community pushback and commitments to fix and improve products and services have helped guide the industry to a more sustainable future. Seasonal peaks in games and consoles are also coming with the Christmas holidays.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is famous for its software, cloud-based and AI offerings. However, the company is also a major player in the video game industry through its Xbox Game Studios subsidiary and the Xbox console, considered one of this generation’s best-selling consoles.
MSFT has acquired several respected game developers and publishers over the years, including Rare (“Banjo Kazooey”), 343 Industries (“Halo”) and Bethesda Softworks (“The Elder Scrolls,” “Fallout” and “Starfield”). The company’s most recent acquisition, and currently the most expensive in the video game industry, was Activision Blizzard for $69 billion. Activision Blizzard was another Buy-rated video game stock before its trading halt, with massive IPs like “Call of Duty,” “Warcraft,” “Starcraft,” “Overwatch” and mobile games like “Candy Crush.” Microsoft gained a lot from this deal, as Activision Blizzard’s financial quarter before the acquisition reported $2.21 billion in net revenue, a 34.25% increase year-over-year (YoY).
Meanwhile, MSFT’s financials aren’t looking too bad, either. The company’s FY24 Q1 ended September 30, 2023, reporting a $22.3 billion net income, a 27% jump YoY. EPS also beat analyst estimates by 12.83%. Price forecasts for Microsoft — currently trading around $377 — could reach as high as $450. Market experts recommending MSFT cite its strategic acquisitions, established brands and lucrative AI and cloud-computing exposure as reasons to include it in video game stocks to buy.
Electronic Arts (EA)
Older gamers might be familiar with Electronic Arts (NASDAQ:EA) for IPs like “The Sims.” The company owns almost 20 studios, developing and publishing games across genres through these subsidiaries. Electronic Arts has published some of the industry’s most iconic and commercially successful games, like “Mass Effect,” “Dead Space” and “Battlefield.” The company also develops online gaming services (EA Live Services) and digital distribution platforms into profitable income streams.
In its latest financial report, EA reported net bookings of $1.820 billion, representing a 4% growth YoY. The company generated recurring revenue with live services and other net bookings, reaching $1.129 billion for the quarter. Live services made up 73% of EA’s business on a 12-month basis, providing a steady revenue stream. EA Sports titles like “EA Sports FC” (previously “FIFA”) and “Madden NFL” exceeded expectations in the last quarter, showing the strength and longevity of these franchises even without FIFA’s commercial branding rights. The company is also doing well in meeting expectations; the last quarter’s EPS beat estimates by 21.95%. There are quite a few reasons why EA is a good video game stock to buy, like its massive presence in the industry, dependable income streams and overall growth prospects.
Sony Group (SONY)
Sony Group (NYSE:SONY) is a prominent multinational multimedia corporation involved in financial services, music and movies, as well as manufacturing TVs, mobile phones, digital cameras and audio devices. It also operates a large gaming and network services business through its flagship products: the PlayStation product line and PlayStation Network. One of the most impressive things about the company is its consistent production of reliable gaming hardware that frequently tops the market.
Its current-gen offering, PlayStation 5 (PS5), was released to impressive demand and experienced massive shortages until January 2023. Since its November 2020 release, the PS5 has garnered over 40 million unit sales and is the best-selling gaming console of this generation. This year, the company also released the PlayStation VR2, a virtual reality headset for the PS5. SONY’s strong market presence and quality hardware and game productions earn it a rightful spot in multiple video game stocks to buy lists.
Sony’s latest financials reported a 32% jump in quarterly sales from its gaming and network services segment YoY due to increased hardware and game sales. Overall sales also increased by 8% YoY. However, total operating income came in at -29% YoY due to slumps in the financial, technology and entertainment service segments. Reported EPS missed estimates by 5.88%, but analysts are still optimistic about the stock. Price forecast analysts expect it to reach $108 (around a 25% potential upside) within 12 months. Positive guidance and consistency in meeting strong PS5 demands give Sony a great chance for excellent year-end results.
On the date of publication, Rick Orford held long positions in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Rick Orford is a Wall Street Journal best-selling author, investor, influencer, and mentor. His work has appeared in the most authoritative publications, including Good Morning America, Washington Post, Yahoo Finance, MSN, Business Insider, NBC, FOX, CBS, and ABC News.