The U.S. video game industry suffered last year following a solid 2020 and 2021. The Fed’s aggressive interest rate hike policy to curb inflation compelled consumers to spend cautiously, which saw them cut down on purchases of discretionary items.

Also, robust demand for video games during the peak of the pandemic fizzled out as consumers once again started opting for outdoor entertainment. However, the industry is trying to bounce back to its earlier highs, thanks to multiple new title releases that are once again driving sales of both video gaming content and hardware.

Videogame Sales Rebounding

The U.S. video game market grew 9% year over year in June, driven by robust sales of a host of new titles, according to the latest data from Circana. Sales also got a boost from the solid success of Sony’s SONY PlayStation 5. PS5 emerged as the best-selling console in terms of both the number of units sold and total dollar sales in June.

This significant achievement coincided with a notable increase in consumer spending on PlayStation hardware, hitting a new record high. Total spending on video game content, hardware and accessories was $4.7 billion in June. This was also the second-best June ever recorded.

Moreover, spending on video games totaled $26.6 billion in the first half, a 2% jump from the previous year.

According to Circana, Diablo 4 claimed the top spot as the best-selling game in the United States in June. This action role-playing game developed by Blizzard Entertainment has now secured the position of the third best-selling game of the year, falling behind Hogwarts Legacy and The Legend of Zelda: Tears of the Kingdom.

Video game sales are trying to make a slow but steady rebound. Higher prices saw people spending less on discretionary items like video games last year. Instead, consumers limited their spending to staples.

Also, a dearth of new title releases impacted sales last year. However, this year has been good for the videogame industry. Inflation has declined sharply to 4.8% from the 40-year-high of 9.1% in June 2022. Although the Fed increased interest rates by 25 basis points in July, it now believes that the economy is going to have a softer landing than expected earlier.

This has raised hopes that the central bank may finally end its monetary tightening policy soon. Lower interest rates will help boost purchasing power. Also, personal income and spending have been on the rise. This bodes well for the video game industry.

Our Choices

The video game industry is making a steady rebound and is expected to grow as more new titles are released in the second half of the year. Given this scenario, it would be ideal to invest in these three video game stocks.

Electronic Arts EA is a leading developer, marketer, publisher and distributor of interactive games (video game software and content). EA distributes gaming content and services through multiple distribution channels as well as directly to consumers (online and wirelessly) through its online portals. EA’s games can be played on video consoles, personal computers, mobile devices, tablets and electronic readers.

Electronic Arts’ expected earnings growth rate for the current year is 25%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past 60 days. Currently, EA holds a Zacks Rank 2 (Buy).

Corsair Gaming, Inc. CRSR designs, markets and distributes gaming and streaming peripherals, components and systems principally in the United States and internationally. CRSR’s offerings include gaming keyboards, mice, headsets, and controllers, along with capture cards, stream decks, USB microphones, studio accessories, and EpocCam software.

Corsair Gaming’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the past 60 days. CRSR presently has a Zacks Rank 2.

Light & Wonder, Inc. LNW is a leading developer of technology-based products and services and associated content for the gaming, social and digital gaming industries globally. LNW operates under three operating segments – Gaming, SciPlay and iGaming.

Light & Wonder’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days. LNW presently has a Zacks Rank 2.

Electronic Arts Inc. (EA): Free Stock Analysis Report

Corsair Gaming, Inc. (CRSR): Free Stock Analysis Report

Sony Corporation (SONY): Free Stock Analysis Report

Light & Wonder, Inc. (LNW): Free Stock Analysis Report

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