We recently published a list of 7 Best Gaming Stocks To Buy Now. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other best gaming stocks to buy now.
A Quick Look at the Gaming Industry
The gaming industry does not only provide entertainment but also drives innovation in technology and creativity. The global gaming market was valued at $249.55 billion in 2022. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 13.1% during 2023-2030 to reach $665.77 billion by the end of the forecast period. This expansion is driven by several key trends that are reshaping how games are developed and played.
The growing popularity of cloud gaming, the introduction of VR and AR technologies, and the rising interest in online gaming are some of the key trends driving market growth.
The rising interest in esports and online gaming tournaments is expected to boost consumer spending on games and contribute to market growth. Esports features teams and individual players competing in various video games. In July and August, the first-ever Esports World Cup took place in Riyadh, Saudi Arabia, attracting over 1,500 players and offering a massive prize pool of $60 million. The event spanned eight weeks and included 23 competitions across 22 different video games, such as Call of Duty and Fortnite. This tournament is part of Saudi Arabia’s Vision 2030 initiative, aimed at diversifying the country’s economy.
Emergence of Generative AI
Another key trend is the integration of generative AI in gaming. This technology allows for the creation of dynamic storylines and realistic characters that can interact with players in a more lifelike manner. Experts believe this will enhance player engagement by personalizing experiences based on individual actions. The potential for AI to craft entire game worlds opens up new avenues for creativity in game design.
According to Bernard Marr, a world-renowned futurist and author of “Generative AI in Practice: 100+ Amazing Ways Generative Artificial Intelligence is Changing Business and Society”, generative AI is revolutionizing video game development by providing tools that enable developers to create engaging content, realistic visuals, and immersive gameplay experiences. Marr believes that generative AI can help developers create vast, unique game environments through procedural generation, allowing for dynamic gameplay experiences that change with each session.
Moreover, this technology can generate music and sound effects that adapt to in-game events, enriching the overall player experience. By automating tasks like quest creation and dialogue writing, generative AI can help developers enhance storytelling and design. Marr thinks that although generative AI won’t replace human creativity, it can speed up game development and reduce costs, which is a big step forward for the gaming industry.
Methodology
To compile our list of the 7 best gaming stocks to buy now, we used the Finviz and Yahoo stock screeners to find the largest gaming companies. We also reviewed our own rankings, sifted through ETFs, and consulted various online resources. From an initial pool of more than 20 gaming stocks, we focused on the top 7 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 7 best gaming stocks to buy now are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is an American multinational corporation that is widely recognized for its software products like the Windows operating system. The company has established itself as a key player in the global gaming market through its development of Xbox consoles and gaming services. Additionally, the company has made significant strides in the gaming industry, particularly with its acquisition of Activision Blizzard for nearly $69 billion in October 2023. With this acquisition, Microsoft Corporation (NASDAQ:MSFT) gains access to a host of popular franchises, including Call of Duty, Warcraft, Diablo, Overwatch and Candy Crush, which have accelerated growth in the company’s gaming business across mobile, PC, console, and cloud platforms. This landmark deal not only enhances Microsoft’s gaming portfolio but also positions it as one of the largest gaming companies in the world.
The company reported strong financial results for its fiscal fourth quarter of 2024, showcasing significant growth across various segments. The company achieved revenue of $64.7 billion, marking a 15% increase compared to the same period last year. Notably, Microsoft Corporation’s (NASDAQ:MSFT) gaming business saw an impressive 44% rise in revenue, driven largely by the acquisition of Activision Blizzard, which contributed 48 points to this growth. Xbox content and services revenue surged by 61%, slightly exceeding expectations, with a net impact of 58 points from the Activision Blizzard deal.
In addition to revenue growth, Microsoft Corporation (NASDAQ:MSFT) reported an operating income of $27.9 billion and a net income of $22 billion for the quarter, reflecting increases of 15% and 10% year-over-year, respectively. In its gaming division, the company highlighted its expanding user base, which has now reached over 500 million monthly active users across platforms and devices. Furthermore, the company previewed a record 30 new titles at its showcase this quarter, with popular games like Call of Duty: Black Ops 6 set to launch on Game Pass.
During the Q4 2024 earnings call, management shared that the success of the Fallout TV show on Amazon Prime also contributed to increased engagement with the franchise on Game Pass, showcasing Microsoft’s strategy to connect its gaming IPs with broader entertainment audiences. Fallout made its debut on Amazon Prime in the quarter ended June 30, 2024, and it became the second most-watched title on the platform. As a result of the show’s popularity, the hours played on Game Pass for Fallout games increased nearly five times compared to the previous quarter.
On September 16, 2024, Microsoft Corporation (NASDAQ:MSFT) announced a quarterly dividend of $0.83 per share, which is an increase of 10% from the previous quarter. This dividend will be paid on December 12, 2024, to shareholders who are on record as of November 21, 2024. Additionally, the board approved a new share repurchase program allowing for up to $60 billion in buybacks, which does not have an expiration date and can be terminated at any time.
This combination of strategic growth and solid financial performance makes Microsoft Corporation (NASDAQ:MSFT) an appealing investment opportunity. According to Insider Monkey’s Q2 database of over 900 hedge funds, 279 hedge funds held stakes in MSFT.
Overall, MSFT ranks 1st among the best gaming stocks to buy now. While we acknowledge the growth potential of MSFT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.