Top Video Game Stocks

The video game industry is involved in the development, marketing, and sale of video game hardware and software. Top companies include Electronic Arts Inc. and Nintendo Co. Ltd. Video game industry sales generally performed well early in the COVID-19 pandemic as business shutdowns and social-distancing measures limited peoples' entertainment options. Because consumers can play video games in the home, they have become a popular option. One of the industry's challenges retaining newly minted gamers as employees return to work at offices amid the reopening of the the economy after the COVID-19 pandemic.

Video game stocks, represented by the VanEck Video Gaming and eSports ETF (ESPO), has underperformed the broader market over the past year. ESPO's total return was -32.4% over the past 12 months versus the Russell 1000's total return of -12.5%. These market performance numbers and all statistics in the tables below are as of Sept. 20, 2022.

Here are the top three video game stocks with the best value, the fastest growth, and the best performance.

Best Value Video Game Stocks

These are the video game stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

^{Source: YCharts}

• Sohu.com Ltd.: Sohu.com is a China-based mainstream media platform that owns a broad range of web properties selling information, entertainment, and communication services It offers a news app, mobile news portal, online video website, and online games platform. The company reported Q2 2022 earnings on Aug. 8. Net income fell 88.8% on a 4.7% drop in total revenues year over year (YOY).
• Nintendo Co. Ltd.: Nintendo is a Japan-based multinational consumer electronics and video game company. It develops and manufactures portable and console game machines as well as software, playing cards, and consumer electronics.
• Playtika Holding Corp.: Playtika is an Israel-based holding company that, through subsidiaries, offers free-to-play social games on mobile platforms as well as social media networks.

Fastest Growing Video Game Stocks

These are the top video game stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric is susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.

^{Source: YCharts; NetEase. Note: NetEast EPS and revenue growth data come from company's Q2 2022 report.}

• Electronic Arts Inc.: Electronic Arts is a global digital interactive entertainment company. It develops games, content, and online services for consoles, mobile devices, and PCs. On Aug. 2, Electronic Arts announced that Q2 2022 net income surged by 52.5% as total revenue rose 13.9% from the prior year quarter.
• NetEase Inc.: NetEase is a China-based technology company providing online gaming products for mobile and desktop devices. The company also offers intelligent learning services and a suite of business products. NetEase Inc. game division NetEase Games announced on Aug. 31 that it had acquired Quantic Dream S.A., a game developer based in both Montreal and Paris. The value of the transaction was not specified in the announcement. With the acquisition, NetEase now has its first studio in Europe.
• Take-Two Interactive Software Inc.: Take-Two is an interactive entertainment company that develops, publishes, and sells video games. For PC, console, and mobile platforms. Their products are distributed among multiple methods, from physical retailers to digital downloads. On Sept. 12, Take-Two subsidiary Zynga. Inc. acquired Storemaven, an Israel-based mobile company focusing on technologies for mobile growth and app optimization. The financial terms of the deal were not disclosed. Because Take-Two's EPS went from positive in Q2 2021 to negative in Q2 2022, it's not possible to calculate a percentage growth number in the table above.

Video Game Stocks With the Best Performance

These are the video game stocks that had the best returns or smallest declines in total return over the past 12 months out of the companies we looked at.

^{Source: YCharts}

• NetEase Inc.: See company description above.
• Activision Blizzard Inc.: Activision Blizzard is an interactive entertainment company that distributers video game on mobile devices, personal computers and consoles. It also manages an esports league and an online gaming service. On Aug. 1, Activision Blizzard reported its Q2 2022 earnings results. The company's net loss widened sharply from the same period a year earlier as total revenue also fell 28% YOY. In January 2022, Activision entered into a merger agreement with Microsoft Corp, which is expected to be completed by the end of June 2023.
• Electronic Arts Inc.: See company description above.

Trends in the Video Game Industry

Video game companies benefited in the early stages of the COVID-19 pandemic as many consumers sheltered at home and turned to at-home entertainment. A June 2020 report by analytics firm Nielsen suggested that four out of five global consumers had played or watched video game content by that stage of the pandemic.

As restrictions lifted, however, video game companies could no longer count on a captive user base at home. In addition, supply chain issues in recent months have depressed video game stocks. The root cause is supply chain bottlenecks that prevented video game companies from producing enough game console products to meet demand, including Sony's PlayStation 5 console.

Advantages of Video Game Stocks

Video games remain a growth industry. According to market research firm Grand View Research, the global video game market was over $195 billion in 2021 and is expected to grow at a compound annual growth rate (CAGR) of 12.9% through 2030.

Several factors are likely to contribute to the rapid growth of the industry. For starters, constant technology upgrades provide video game enthusiasts with an improved gaming experience. Also, a variety of new monetization models enable video game companies devise strategies that encourage consumers to spend money on products after the initial purchase of a game or hardware. The emergence of immersive, metaverse-style gaming may also attract a new global audience.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.