LONDON/PRNewswire/ — According to KPCB, there are 2.6 billion gamers worldwide – that’s 2.6 billion people turning to video games for relaxation, entertainment or to kill time on the bus or metro. The Institute for the future estimates that gamers spend well over 3 billion hours per week playing games on smartphones, laptops, PCs, hand-held devices, and gaming consoles like Microsoft’s Xbox or Sony’s Playstation.
Video games, which used to be considered a niche market with little mass appeal, has grown 26x in the last 20 years to become a hugely valuable part of the modern technology consumer market. Companies in focus today include: Intel Corporation (NASDAQ: INTC), Snap Inc. (NYSE: SNAP), Microsoft Corporation (NASDAQ: MSFT), Tencent Holdings Limited (OTC: TCEHY), Dell Technologies Inc. (NYSE: DVMT)
What’s more, it’s a market with tremendous diversity. While some game developers focus on single-platform releases with high name-recognition, on a model similar to big-budget movie releases (think of Halo, Call of Duty, Destiny, FIFA), others try to carve out a new market through innovation.
The rise of hand-held, casual gaming has also presented opportunities for games-based marketing, direct-to-consumer advertising and micro-transactions that can turn a single game into a cash machine for whichever company develops it.
Savvy investors, therefore, have a lot to choose from. Here are just a few companies looking to take advantage of the gaming boom that investors can look to for strong current and future growth:
1. Nintendo Co., Ltd.
The famous developer was a pioneer in the gaming industry thirty years ago. After passing through a rough period, amidst fierce competition for platform market share with Sony and Microsoft, Nintendo has bounced back.
Recent quarterly earnings were $1.37 billion, a leap of 150 percent from a year ago. Expectations for future profits are high, thanks in large part to Switch, a new gaming platform that debuted earlier this year. Light, portable and multi-purpose, the Switch has driven strong sales for Nintendo, which expects to move 10 million units in this fiscal year.
Nintendo shares have jumped to a 52-week high and now sit near $42. An analyst from Credit Suisse forecasts the company will sell 130 million units through 2022.
The reason is the platform’s small size, which has allowed it to be marketed like a hand-held despite its design as a traditional platform, and the positive buzz it’s generated since its debut.
A few years ago, market-watchers were unsure that Nintendo could stage a comeback. Those doubts look like they’ve been put to rest.
The rise of PC and mobile gaming has brought with it a potent opportunity for advertisers, as well as a significant challenge. The new, and fast-growing market of interactive media advertising is set to become a $7 billion market by 2019, according to Statista – but game developers, and brands have yet to hit upon a scalable, flexible solution for in-game brand engagement.
As video games and interactive media look to surpass TV, radio, and movies as the most-consumed forms of media in the world, companies looking to expand their brands and attract new customers have found it difficult to penetrate gaming in a way that appeals to users.
Versus Systems, Inc. has developed a bold new way to address these problems. A small-cap company with some big ambitions, Versus seeks to do for gaming what Google AdWords has done for search ads, and what Facebook has done for social media advertising.
The Versus approach centers on prizes and promotions. The Versus platform allows game developers and publishers to offer real world rewards in-game. When players win matches, or reach specific in-game achievements, they are rewarded with real prizes that are sponsored by brands they likely already engage with. The Versus platform connects players’ in-game behavior to real-world rewards.
This system eliminates the need for intrusive pop-ups or advertising unconnected with the gaming experience, making the games more engaging and fun while allowing brands to reach the most engaged audience on earth.
Versus is inked a major deal with 704Games, the company with exclusive rights to develop games for NASCAR, which, according to Forbes, was the biggest spectator sport in the United States.
NASCAR has over 1000 brand sponsors, which means hundreds of brands that Versus could potentially harness for prizes and promotions in 704Games’ new releases on mobile, PC, and console.
Versus’ model should attract more developers like 704Games, as it drives additional player engagement and creates a new revenue stream for game developers through these targeted prizes and promotions.
By creating additional reasons for players to play longer and more often, and by sharing the advertising revenue from brands looking to engage with players, Versus aligns the incentives of the game developers, players, and brands – all of whom want to create a seamless and engaging experience for players.
Versus is poised to solve one of gaming’s biggest challenges: how to work with brands and advertisers in a unique way to make games more engaging for the world’s 2.6 billion gamers. With a system that integrates ads in an organic, experienced-based way, Versus (CSE: VS; OTC: VRSSF) could be the company that really breaks open the box on this enormous, and fast-growing market.
3. Dell Technologies (NYSE: DVMT)
Once one of the world’s largest computer manufacturers, Dell suffered some significant set-backs when it ran into competition from newer, leaner tech companies. The company has since recovered and is pushing some new frontiers in gaming tech, including VR and high-performance gaming rigs and laptops.
In January the company announced a range of new gaming laptops. Dell’s premier brand, Alienware, which markets mostly to casual gamers and those looking to customize their gaming experience, will be releasing new models in 2017 in all three size ranges.
Apart from its Alienware brands, Dell has marketed its Inspiron laptops to more budget-consciousconsumers, or those looking to get a slightly less-bulky gaming model. The Dell Inspiron 15 is sleek, dependable and comes in at just $799 (the cheapest Alienware is $999, and that’s before customization).
These popular brands, name-recognition and strong marketing has made Dell the top name in laptops, both for dedicated gamers and casual consumers.
Dell share price has been on the up-swing since January 2017, rising from $54 to a current high of near $77. Should the company continue to prosper, its likely share price will increase by an even greater margin.
4. Tencent Holdings (OTC: TCEHY)
A major player in the rapidly-expanding realm of “esports,” Tencent Holdings owns Riot Games, the developer of the popular League of Legends. Esports, the genre of hand-held and online games that allows players to compete with one another, often for money prizes.
Tencent Holdings is a Chinese tech giant based out of Hong Kong. Along with Alibaba, it’s widely considered one of the most dynamic Chinese tech firms. Its resources are immense, as evidenced by its $8.6 billion acquisition of Supercell, the Finnish developer of hand-held games like Clash of Clans, another popular title.
Games held by Tencent attract massive audiences. League of Legends, just on its own, saw 14 million people view its championship tournament, with 30 million tuning in at some point or another.
With its acquisition of Supercell and its constant expansion into the esports and handheld gaming realms, Tencent Holdings looks set to continue its rise. Share price traded in the U.S. has shot up like a rocket since January 2017, rising from $25 to $40, and there doesn’t seem to many signs that the share price will decline any time soon.
Tencent Holdings is definitely a strong buy for anyone looking to burnish their gaming portfolio.
5. Asustek Computer Inc.
While not strictly a gaming stock, the Taiwan-based laptop manufacturer Asustek maintains a presence on the gaming market with its range of affordable, multi-purpose laptop computers.
After a rough few years, where it launched an expensive foray into the realm of smartphones, the company set about restructuring in 2016 and early 2017. It’s now set to re-engage markets and focus more heavily on its gaming laptop division, according to the Nikkei Asian Review.
The strategy seems to be working. The company expects revenues in Q3 of 2017 to grow 15-20 percent on last year, with a major rebound coming in late 2017 and stability in 2018.
While sales volumes are expected to be lower, with only about 18 million units moved in 2017, higher item prices means bigger profits, while cost-cutting will improve overall free cash flow.
Many PC gamers prefer to use high-end gaming rigs, which can run in the $2000 or $3000 range. Gaming laptops, however, have become increasingly popular. Light, cheap and capable of playing even new games on lower graphics settings, the proliferation of affordable gaming laptops from Asustek and other developers indicates how the market has grown.
Recent research shows that gaming hardware sales were $26 billion in 2016 and likely to rise above $30 billion by 2017. While “heavy” gamers accounted for 46 percent of total sales, they constituted only 3 percent of the total consumer base.
Should Asustek succeed, it could tap into that potential market and reap some significant profits.
Other companies to have on your radar:
Microsoft (NASDAQ: MSFT) is one of the most innovative and well-known companies within the tech sector, but with its Xbox video game system, the company has made waves in the gaming world. Microsoft’s Xbox Live gave gamers a way to communicate, face off, or make purchases on an entirely new platform. The landmark addition created an ease of access that has changed the gaming market forever.
But Microsoft is appealing to investors for more than just its gaming platform. Like Intel, Microsoft is diving head first into an entirely new market. With key partnerships utilizing and implementing blockchain technology, the company’s upside could have huge potential as the tech takes off.
Snap Inc. (NYSE:SNAP) To much fanfare, Snap IPO’ed earlier this year and managed to surprise many analysts. Snap Inc. operates as a camera company. It offers Snapchat, a camera application that helps people to communicate through short videos and images. The company also provides a suite of content tools for partners to build, edit, and publish snaps and attachments based on editorial content.
The company IPO’ed at $17 and quickly saw its share price reach $25, before falling back to
IPO levels and below. While snapchat continues to look for ways to innovate, investor sentiment in this stock has soured and some now see it as a ‘dead stock walking’
Intel Corporation (NASDAQ:INTC) is a leader in multiple fields of technology. The forward thinking industry giant is the backbone of many laptops and PCs running the Windows operating system. The company has been so successful in its deal-making and advertising that it is impossible to escape its influence.
Not only is Intel running our laptops, it may soon be taking over the financial industry. As a leader in the blockchain push, Intel has partnerships with banking heavyweights worldwide. Intel is also expanding its reach within the Internet of Things, creating new ways to receive, process, and store data.
Savvy investors are definitely following Intel closely, as many see it as a leader in the race to create an entirely new internet. September to drive more demand for HDMI 2.0 products.