After a couple of years of pandemic-fueled growth, 2023 was a year that many video game manufacturers would like to forget. Layoffs in the industry were a common occurrence as consumer demand leveled off despite the launch of new games. But not every company did poorly, and those companies are likely to be among the best video game stocks for 2024.
Currently, gamers are enjoying an immersive experience like they’ve never imagined. Beyond the graphics, generative AI, virtual reality and augmented reality are elevating the gaming experience.
But, video games are still a discretionary purchase even when it’s just a download to your gaming console. And many consumers are minimizing their spending. So one thread you’ll see on this list of video game stocks for 2024 is the significance of franchise games. These familiar titles remain one of the strongest growth drivers and will remain so in 2024.
Nintendo (NTDOY)
While not always perfect, analyst ratings can give you an idea of a stock’s valuation. In the case of Nintendo (OTCMKTS:NTDOY), analysts suggest investors may have a screaming buy on their hands. Out of 22 analysts that are offering ratings on the stock in the past three months, 11 give Nintendo a strong buy.
What is more interesting is that 18 analysts have issued a one-year price target on NTDOY stock. The average estimate is $47.14 which would be a 271% increase from the stock’s closing price on January 3, 2024. That story gets even better when you consider that the minimum target is $33.81.
The reasons for analysts’ optimism includes the Japanese company’s adept management of currency risks and the release of the Super Mario Bros movie that stirred nostalgia for the company’s products.. But one metric that stands out to me is the way the company is growing its annual recurring revenue (ARR).
In its most recent quarter, the company announced its Nintendo Switch Online community had grown to 38 million members. While the year-over-year (YOY) growth rate of 6% isn’t terribly exciting, it does translate to approximately $1.3 billion in ARR.
And, if the company releases the next generation of its Nintendo Switch sometime in 2024, that would be another catalyst for NTDOY stock.
Sony (SONY)
When you think about video game stocks for 2024, I have it on good authority that Sony (NYSE:SONY) belongs on a short list. According to my gamer son, Sony is “killing it” with its PlayStation 5 (PS5). It confirms what I thought I knew and also what other InvestorPlace contributors have been writing about SONY stock.
Investors remember when the PS5 launched in 2020. Supply chain problems delayed the rollout, but it hasn’t stifled demand. In fact, in the company’s most recent quarter, Sony shipped 4.9 million consoles which broke its previous record.
And as you would expect, the company is in the middle of its traditionally strongest quarter. That should be confirmed to investors when the company reports earnings on February 1, 2024.
SONY stock has a forward P/E of 17.2x with earnings expected to grow by more than 15% in the next year. That makes SONY attractively valued. And out of 22 analysts that have offered a rating on the stock in the last three months, 17 give it a strong buy rating.
Take-Two Interactive Software (TTWO)
In early December 2023, fans of the Grand Theft Auto series got an early Christmas present. Take-Two Interactive Software (NASDAQ:TTWO) released the long-awaited trailer for GTA VI, and it promptly got over one billion views.
A hype video for a video game may not make sense to some investors. But it makes all the sense in the world to the gamers who are hungry for the next installment in a franchise that hasn’t been updated for 10 years.
That was the icing on the cake for shareholders who enjoyed a 54% increase in TTWO stock. And, with projections for earnings growth of 242%, the stock may have further to run.
Most of the attention will be on the launch of GTA VI, expected to launch sometime in the company’s 2025 fiscal year. But that means it could drop sometime late in 2024. And that’s just one title in the company’s pipeline.
Currently, analysts have a consensus price target of $167.29 which is only about 5.6% higher than the stock’s closing price on January 3, 2024. With a forward P/E ratio of 102x, analysts may be looking for TTWO to prove it. But as the launch date grows near, you can expect analysts to bid the stock higher.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.