The world of gaming has never been so full of opportunity and uncertainty. For an industry that’s expected to grow to a market value of $312 billion by 2027, many of its biggest players are still divided over how this growth will manifest itself.
Although Microsoft’s (NASDAQ:MSFT) 2022 acquisition of leading gaming firm Activision Blizzard was in part a metaverse play, the furor surrounding the metaverse has since calmed significantly. Despite this, we’re seeing use cases for Web 3.0 gaming and the incorporation of non-fungible tokens (NFTs) and cryptocurrencies as a means of broadening the horizons of what video games can achieve for their players.
However, we’re also seeing plenty of barriers to the growth of gaming stocks. Growing competition has stunted the growth of some stocks, while uncertainty over the appropriate incorporation of generative AI has prompted a backlash among consumers.
In a market that’s so full of opportunities, there’s still plenty of danger for the sustainability of the landscape’s strongest stocks. With this in mind, let’s take a look at three gaming stocks that could be a screaming sell in a tumultuous industry:
GameStop (GME)
In an industry full of unconventional stocks, it’s some achievement that GameStop (NYSE:GME) is perhaps the most famous gaming stock on Wall Street today.
However, GameStop’s popularity has virtually nothing to do with the video game retail company itself, and therein lies the problem for the future of the stock.
GameStop has consistently been the focal point of meme stock rallies, ever since the globally renowned retail investing influencer Keith Gill, otherwise known as Roaring Kitty, decided to cheerlead for GME in the buildup to its 4,000% short squeeze in January 2021.
While the stock has since consistently slid from its astronomical peak, Gill recently returned from a social media hiatus to inspire more retail investors to buy back into GME.
Although GameStop’s most passionate retail investors fiercely promote the ‘diamond hands’ mentality, it can be extremely difficult for individuals to hold their positions in stock without any fresh positive news to drive further outperformance. With this in mind, it’s overwhelmingly likely that GME is destined to slide from its Q2 2024 highs over the rest of the year.
Electronic Arts (EA)
Having spent almost 20 years as the uncontested market leader in soccer video game titles for consoles, Electronic Arts (NASDAQ:EA) appears set to face a brand new level of competition that could threaten the bottom line of the company at a challenging time for its dominance.
Last year, EA’s partnership with soccer governing body FIFA ended, prompting a reversion from its hugely successful FIFA series to EA Sports FC.
While the game itself was largely unchanged in terms of content, the firm expected slower sales and Electronic Arts’ Q1 2024 revenues of $1.78 billion saw a 5.1% year-on-year decline in line with analysts’ expectations.
Worryingly, EA’s former naming rights partner, FIFA, recently announced that it would be reviving the FIFA title with rival gaming studio 2K Sports.
Reports suggest that a rival soccer title could arrive as soon as this year, posing a fresh threat to EA’s market dominance.
For Electronic Arts, facing a challenge to its dominance in the soccer market is a significant danger. In March 2021, during the peak of EA’s partnership with FIFA, the game’s Ultimate Team mode amassed $1.62 billion in extra content revenue alone from in-game purchases.
Should 2K Sports eat into EA’s market share, we’re likely to see the Vancouver-based studio suffer in terms of its bottom line.
Hasbro (HAS)
Finally, we get to look at a stock that could be set to struggle as a result of unease over the generative AI boom. Although Hasbro (NASDAQ:HAS) isn’t directly implicated in the ongoing GenAI content storm, its subsidiary, Wizards of The Coast has struggled with repeated backlashes over its behavior.
In January 2024, Wizards of The Coast was caught using generative AI art to advertise its Magic: The Gathering trading card game only a matter of weeks after the company pledged to use human artists rather than artificial intelligence within its operations.
After initially denying the use of AI, Wizards of The Coast ultimately admitted that the image was created with “some AI components.”
In recent weeks, Wizards of The Coast began advertising for an AI engineer, prompting further scrutiny among consumers.
Despite fears over falling sales, Hasbro outperformed its expectations in Q1 2024 earnings. However, commentators have suggested that the stronger-than-expected quarter has been down to the performance of gaming titles like Baldur’s Gate 3 and a crossover between Fallout and Magic: The Gathering. Should the stock face further scrutiny in the future, it may find less support.
On the date of publication, Dmytro Spilka did not hold (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.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.