3 Stocks That Will Benefit from New Video Game Consoles in 2020

The Electronic Entertainment Expo (E3), the biggest video game gathering in the world, took place last week in Los Angeles. While no official announcements were forthcoming regarding new consoles, enough was said during the event to indicate that the next console generation is coming sooner rather than later.

That could be seen as somewhat surprising, given that both Sony Corp (ADR) (NYSE:SNE) and Microsoft Corporation (NASDAQ:MSFT) have released enhanced versions of their consoles recently. However, those releases may be more indicative of a new trend that’s designed to help consoles stay more competitive with ever-improving PC gaming throughout their lifecycles, rather than as a means of further extending console lifecycles. If that’s the case, it wouldn’t be at all surprising to see new consoles from Sony and Microsoft by 2020.

New consoles would bode well for several companies and their shareholders, including Sony Corp (ADR) (NYSE:SNE) itself, Advanced Micro Devices, Inc. (NASDAQ:AMD), and GameStop Corp. (NYSE:GME). We’ll take a look at how these companies and their stocks will benefit from new consoles in this article.

Advanced Micro Devices, Inc. (NASDAQ:AMD)

Reports suggest that Advanced Micro Devices, Inc. (NASDAQ:AMD) will play a huge role in the PlayStation 5’s development, with the system’s GPU being based on custom Navi architecture, while its CPU will also be handled by AMD’s Zen. While there aren’t yet as strong of ties between Microsoft’s next console and AMD, it’s certainly possibly that AMD could also assume those same dual functions for the next Xbox, as it was also the processor supplier for the Xbox One.

That’s more good news for Advanced Micro Devices, Inc. (NASDAQ:AMD), which has surged by over 60% in the past two months on the strength of huge gaming growth. In the first-quarter, revenue for AMD’s computing and graphics segment jumped by 95% thanks to Fortnite and the continued growth of social gaming and game streaming on PCs, which requires ever-more powerful processors.

30 hedge funds tracked by Insider Monkey were shareholders of AMD at the end of 2017, owning 6.4% of the company’s float. During the first-quarter, several other hedge funds took up new positions in the stock as well, including Seth Fischer’s Oasis Management (19.18 million shares), Joel Greenblatt’s Gotham Asset Management (924,045 shares), and Leon Shaulov‘s Maplelane Capital (790,000 shares).

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On the next page we’ll look at two other stocks that will benefit from the launch of next-generation video game consoles in 2020.

GameStop Corp. (NYSE:GME)

We recently noted that shorts were dead wrong about GameStop, and this was precisely one of the reasons why: consoles are not dead, as has long been falsely predicted and this next console lifecycle will bring another much-needed jolt to GameStop Corp. (NYSE:GME)’s top-line, buying it several more years to figure out its direction while physical game sales continue to slide.

That is, if the company isn’t bought out first, as it’s reportedly exploring a sale. Either way, those are two positive potential catalysts for a stock that still looks ridiculously cheap despite its 24% gains in the past month, trading at a forward P/E of 5.51 and sporting a price/book ratio of 0.74 and dividend yield of nearly 11%.

Sony Corp (ADR) (NYSE:SNE)

Unlike rival Microsoft, Sony Corp (ADR) (NYSE:SNE)’s game business is far more integral to its overall success, accounting for about 30% of the company’s revenue (Xbox on the other hand contributes mere percentage points to Microsoft’s overall revenue). That means the potential spoils of Sony’s next console launch will be ripe for the taking by shareholders of the Japanese company’s ADRs. Since the PlayStation 4’s launch in late-2013, Sony’s shares have more than doubled in value, largely on the back of the console’s tremendous success.

Sony Corp (ADR) (NYSE:SNE) will arguably be even better positioned to dominate the gaming market with the PS5 than it was with the PS4, thanks to the expected backwards compatibility that PS5 will have with PS4 games, which wasn’t the case with PS4 & PS3 games.

Then there’s Sony’s PlayStation Plus subscription service, which had soared past 34 million gamers as of March, 25 million more than there were just four years earlier. Those gamers, which receive a selection of free games for all of Sony’s systems every month for so long as they remain members, have added incentive to remain within the Sony gaming ecosystem to retain access to all of those games.

Those could be tough hurdles for Microsoft and Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) to overcome in the next console generation, which is why our money’s on Sony to build further on its success and cement its status as the dominant force in console gaming.

Disclosure: None