Gaming stocks are enjoying a $260 billion industry boom. News ad

The gaming industry is experiencing explosive growth, fueled by rapid technological advancements and growing consumer demand. The gaming sector, valued at $220 billion in 2024, is projected to reach $260 billion by 2026. New York Stock Exchange: SONY and Microsoft NASDAQ: MSFT often dominate the headlines, investors are increasingly turning their attention to a different type of company poised to benefit from this unprecedented expansion.

Explosive growth of the gaming industry

There are several key factors behind the gaming industry’s current growth trajectory. The current market size of $220 billion in 2024, with forecasts pointing to growth to $260 billion by 2026, highlights the sector’s sound financial health and enormous potential. This consistent year-on-year revenue growth highlights the growing global penetration of gaming. Technological advances play a critical role in shaping the future of the industry.

Virtual reality (VR) and augmented reality (AR) technologies create more immersive and engaging gaming experiences. Cloud gaming breaks down barriers by making high-quality games available on a variety of devices without the need for expensive hardware. Mobile gaming in particular is seeing explosive growth, especially in regions with high smartphone penetration, further expanding the market.

Consumer demand is also evolving, with changing demographics expanding the gaming audience beyond the traditional audience of young men. The rise in popularity of eSports has added another layer of excitement and increased revenue, attracting significant viewership and sponsorship deals. Moreover, the increasingly social aspect of gaming, including online multiplayer games and streaming platforms, is driving increased engagement and the development of vibrant communities.

Roblox Corporation – a platform for user-generated growth

Roblox today

Roblox Co logo.
$59.45 -0.48 (-0.80%)

(As of 12/27/2024 5:45 PM ET)

52 week range
US$29.55

$61.77

Target price
$55.67

Roblox Corporation New York Stock Exchange: RBLX was founded in 2004. Since then, it has carved out a unique niche in the gaming world as a user-generated content platform. Unlike traditional gaming companies that develop and publish their games, Roblox gives its users the ability to create, share, and monetize their games and experiences. This innovative business model has fostered a vibrant ecosystem of creators and players, fueling the company’s significant growth.

Roblox’s user growth rates are particularly impressive. The number of monthly active users on the platform has increased by 30% compared to last year, highlighting its broad appeal, especially among young people. This expanding user base is a testament to Roblox’s compelling content and its success in expanding into new markets around the world. The platform’s engagement metrics further highlight its popularity, with users spending billions of hours exploring and interacting with a variety of user-generated games.

Roblox MarketRank™ Stock Analysis

Overall MarketRank™
57th percentile

Analyst rating
Moderate purchase

Pros/Cons
6.4% Minus

Short interest level
Healthy

Dividend Power
N/A

Environmental assessment
N/A

Mood News
0.63mentions of Roblox in the last 14 days

Insider trading
Sale of shares

Project Profit Growth
Growing

See full analysis

Roblox’s financials showed strong revenue growth. The company reported a 40% increase in annual revenue, and third-quarter 2024 results showed revenue growth of 9.5% year-over-year to $919 million. Despite reporting EPS of -$0.37 for the quarter, Roblox managed to beat the consensus estimate by $0.02. Although the company reported a net loss of $239.3 million for the third quarter of 2024 and had negative net income, these numbers should be viewed in the context of its rapid growth and significant investment in platform development.

The Roblox analyst community currently has a Moderate Buy consensus rating and an average price target of $55.67. Recent moves by several analysts further highlight the stock’s potential. For example HSBC New York Stock Exchange: HSBC initiated coverage with a Buy rating and a $63 price target on December 12, 2024. This initial coverage, as well as numerous positive price target adjustments, reflect confidence in Roblox’s growth trajectory.

NetEase Inc. – a powerful mobile game developer

NetEase today

NetEase, Inc. logo.
$91.48 -0.83 (-0.90%)

(As of 12/27/2024 5:45 PM ET)

52 week range
$75.85

$114.50

Dividend yield
1.89%

P/E ratio
15.45

Target price
$107.29

NetEase Inc. NASDAQ:NTES has become a dominant force in the Chinese Internet technology sector. The company’s diverse portfolio includes online gaming, music streaming through NetEase Cloud Music, online education through Youdao and e-commerce under the Yanxuan brand. With a current market capitalization of $59.28 billion, NetEase has firmly established itself as a major player on the global technology stage.

NetEase’s strength lies in its dominant presence in the mobile gaming market, especially in China. The company has successfully expanded its presence in the PC gaming sector, with games like Marvel Rivals gaining significant popularity. The renewed partnership with Blizzard Entertainment is expected to further strengthen NetEase’s gaming portfolio by providing access to an extensive library of popular games and a dedicated player base.

NetEase MarketRank™ Stock Analysis

Overall MarketRank™
93rd percentile

Analyst rating
Moderate purchase

Pros/Cons
Growth potential 17.3%

Short interest level
Healthy

Dividend Power
Moderate

Environmental assessment
-1.01

Mood News
0.81mentions of NetEase in the last 14 days

Insider trading
N/A

Project Profit Growth
9.15%

See full analysis

NetEase’s earnings report for the third quarter of fiscal year 2024 (3QFY24) demonstrated its strong market position with net revenue of RMB 26.2 billion (USD 3.7 billion) and net profit attributable to shareholders of – 6.5 billion yuan (931.7 million US dollars). The company’s financial health is also evidenced by its significant cash reserves of approximately US$17 billion, as well as its commitment to shareholder value through a dividend yield of 1.89% and an active share repurchase program.

The NetEase analyst community consensus rating is Moderate Buy, with an average target price of $107.29. Recent analyst actions have included upward adjustments to the stock’s price target to $126.00. These adjustments reflect the dynamic nature of the market and the ongoing assessment of NetEase’s performance.

Powerful future

The remarkable growth of the gaming industry is creating a plethora of investment opportunities that go well beyond the established giants of the sector. Roblox Corporation and NetEase Inc. provide two compelling examples of companies benefiting from this expansion, each leveraging unique strengths and strategic initiatives to drive growth. Roblox’s innovative user-generated content platform and expanding global reach make it a formidable player in the industry. NetEase, with its dominance in the mobile gaming market, strong financial position and diversified portfolio, offers compelling investment opportunities, especially for those looking to enter the Chinese market.

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