Roblox, Take-Two, Nintendo and Microsoft’s share prices have all benefited from a surge in interest in gaming stocks.
But in a time of industry consolidation and talk of metaverses, which one should investors back? We take a look.
The mobile play: Take-Two Interactive’s share price
Take-Two’s [TTWO] stock jumped 7.35% on Friday 4 February after a new entry in the Grand Theft Auto series was teased. As the parent company of GTA’s Rockstar Games, GTAs developer, stands to benefit from the massively popular open world crime saga whose last edition sold 155m copies worldwide and is still actively played despite being released almost a decade ago.
Also powering up Take-Two is the $12.7bn acquisition of mobile game publisher Zynga. Mobile gaming is only going to grow over the next decade, with a report from GlobalData estimating the market will be worth $272bn in 2030, a CAGR of 11%.
Estimated size of the global mobile gaming market by 2030, per GlobalData
Analysts seem to be backing the deal, especially as it will enable Take-Two to tap its strong IP for mobile. Following the announcement, KeyBanc’s Tyler Parker upped his rating from Sector Weight to Overweight, with a $185 price target.
Among the analysts tracking the stock on Yahoo Finance, Take-Two has a $207.04 price target, suggesting a 20% upside.
The metaverse play: Roblox share price
Roblox’s [RBLX] share price is down over 7% (as of Tuesday 8 February’s close) since its IPO last March. But with constant talkabout the metaverse being the next internet, the online gaming company could be one to buy. The company is less a video games maker and more a platform that allows users to develop their own virtual worlds - ie what is now fashionably termed a ‘metaverse’.
"The metaverse is bigger than gaming," according to Roblox vice-president of brand partnerships, Christina Wootton, reports Investors Business Daily. "We're ushering in this new category of human co-experience … where people can come and connect with one another and have shared virtual experiences."
Quite a statement, but analysts are generally favourable on Roblox - even if some have trimmed their price targets. Morgan Stanley’s Brian Nowak lowered his target from $150 to $115, but kept his Overweight rating on the stock. Over at Stifel, Drew Crum lowered his price target from $134 to $110 after reducing his fourth quarter estimates on the stock. Seeing as Roblox closed at $64.43 on Tuesday, both price targets still represent a decent upside.
The consolidation play: Microsoft’s share price
Through its Xbox consoles, Microsoft has become a major player in the video games industry, with its gaming segment now accounting for 11% of total revenue. In 2021, the division responsible for the current-gen Xbox Series X and S series posted $16.28bn in sales, its highest ever annual revenue. This success has benefitted Microsoft’s [MSFT] share price, which has gained over 25% in the past 12 months.
In January, the tech giant announced its biggest ever acquisition - the $68.7bn purchase of Activision Blizzard, the maker of Call of Duty and Elder Scrolls. When the deal was announced, Microsoft CEO Satya Nadella mentioned the metaverse, something that he shed more light on in a recent interview with the Financial Times, saying that the metaverse is ‘essentially about creating games’.
“Today, I play a game, but I’m not in the game. Now, we can start dreaming [that] through these metaverses: I can literally be in the game, just like I can be in a conference room with you in a meeting.”
Among the analysts, Microsoft’s share price has a $370.97 price target - suggesting a 22% upside on Tuesday’s close.
“Today, I play a game, but I’m not in the game. Now, we can start dreaming [that] through these metaverses: I can literally be in the game, just like I can be in a conference room with you in a meeting” – Microsoft CEO Satya Nadella, per the Financial Times
The industry legend play: Nintendo’s share price
Nintendo’s share price [7974.T] has fallen more than 7% over the past 12 months. However, now could be a buying opportunity as strong sales have led to a recent recovery in the stock, which is up 10% over the past month.
A leading figure since the 1980s when the word ‘Nintendo’ became a synonym for video gaming, the company has both staying power and innovation.
The Nintendo Switch was the best selling console in the US in both terms of units sold and dollar value last year. Overall, the console has sold over 100m units since launch way back in March 2016 and the Switch’s lifetime sales have now eclipsed those of the company’s Wii console. However, Nintendo trimmed its Switch sales forecast for this year from 24m to 23m due to component shortages.
For the quarter running October to December, Nintendo reported operating income of 252.5bn yen, up 10% year on year. That gave the games maker the confidence to increase full-year profit guidance by 10% to come in at 560bn yen.
Is Nintendo going to get involved with the metaverse? Nintendo President Shuntaro Furukawa told investors that while the metaverse is an interesting concept, the company would only become involved if it could deliver its trademark ‘surprise and fun’.
As a prestige brand, Nintendo is host to evergreen franchises such as Mario and Zelda, and has demonstrated its durability as a business. With the stock still off its 52-week high, and this month’s Nintendo Direct event promising 40 minutes of Switch news, there could still be more gains to come in the stock.
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