SA Asks: What are the best gaming stocks right now?

What are the best gaming stocks right now for investors?

We asked Seeking Alpha analysts Kenio Fontes and Daniel Jones for their picks.

Kenio Fontes: Two companies stand out for me in the industry, Nintendo (OTCPK:NTDOF) and Take-Two Interactive (NASDAQ:TTWO), and both have interesting catalysts.

Nintendo (OTCPK:NTDOF) has an undeniable moat when compared to its peers. The competition for it is very different because it dominates a niche and differentiates itself with both its hardware and exclusive games, managing to exploit its IPs and loyal fan base very well. The catalyst is the Nintendo Switch 2, which should maintain the company’s momentum, as pre-sales show.

Take-Two (NASDAQ:TTWO), on the other hand, has the launch of Grand Theft Auto VI in 2026, which is arguably the most anticipated game in history. In terms of financials, it should bring in a few billion in revenue in the first year and expand the margin.

Although growth prospects and moats make them appealing alternatives for the long term, the problem for these two is that much is already priced into the valuation.

Daniel Jones: While known far more for its cloud computing and work-related software applications, Microsoft (NASDAQ:MSFT) is a major player in the global video game industry. Between 2024 and 2030, the video game space is expected to grow from $217.1 billion to $583.7 billion. As the owner of the Xbox platform, Microsoft (NASDAQ:MSFT) stands to benefit from this expansion.

According to some estimates, by February of last year, the company’s Game Pass service had grown to 34 million users. This year it’s expected to hit 50 million. With the service starting at only $9.99 per month and opening the door to gamers through the provision of over 400 first and third-party games, it represents an attractive value proposition for gamers and for Microsoft (MSFT) shareholders.

Unfortunately, since gaming represents only a small portion of the company’s overall revenue, it’s not considered a pure play video game prospect. In fact, most of the value moving forward will come from Microsoft’s core operations, like what it’s doing on the cloud computing front. This could limit the appeal for investors who want more of a pure play player in the video game industry. But for those who want diversification and attractive growth at a good price, Microsoft (MSFT) is certainly worth considering.

One of the more interesting prospects in the video game industry these days is Take-Two Interactive (TTWO). The company has both good and bad aspects to it.

On the one hand, from 2023 through 2025, revenue expanded from $5.34 billion to $5.63 billion. But the firm also generated an aggregate net loss during this window of time of $9.35 billion. Admittedly, $5.89 billion of this came from impairment charges, while the company spent another $211.1 million on business reorganization costs. Clearly, this is a company that has some issues.

On the other hand, there is opportunity here. While the company has a number of leading franchises such as Red Dead Redemption, its upcoming installment of the Grand Theft Auto franchise has been highly anticipated. The most successful of these was Grand Theft Auto V, which was released in 2013 and has since sold over 210 million units across the globe. Analysts estimate that, in the first year, the newest installment, Grand Theft Auto VI, will sell 40 million units and generate $3.2 billion in revenue.

However, it has become a running joke that certain things that are improbable or far off into the future will occur before that game comes out. The latest news from management was that instead of coming out in the fall of this year, the game will now be released in May 2026. But seeing as how planning for the game did not start until 2018 and principal production did not begin until 2020, it wouldn’t be surprising to see such a long-lasting project take longer to get completed.

Naturally, this could represent significant upside potential for shareholders of the business. But when stacked against the bottom-line results of the company in recent years, it certainly makes it a riskier opportunity.

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