There are some gaming stocks to sell that investors should consider closely. These gaming companies are in risky positions, with declining revenues and increasing competition from newer entrants.
What makes holding these companies worse is that the gaming industry is undergoing major disruptions and shifts. The rise of mobile gaming, cloud gaming services and new business models like free-to-play are reshaping how games are developed, distributed and monetized. Traditional gaming companies that have been slow to adapt to these changes are at risk of being left behind.
Moreover, the gaming market is becoming increasingly saturated and competitive. Indie game developers can now self-publish their games digitally with lower barriers to entry. At the same time, big tech giants are investing heavily in gaming as they look to control more parts of the value chain.
So here are three gaming stocks for investors to consider getting rid of in March this year. It would be worthwhile for investors to take these suggestions seriously.
Corsair Gaming (CRSR)
Corsair Gaming (NASDAQ:CRSR) is a California-based company that designs, markets and distributes gaming and streaming equipment. The company faced slower user growth, and negatively pre-announced its Q2 revenue and adjusted EBITDA.
The earnings per share for 2023 stood at 3 cents, with a net income of $3.19 million, demonstrating a slim net margin of 0.15%.
These results are unimpressive for a small company like Corsair and things will continue to be lackluster for the brand. Corsair projected its revenue guidance for 2024 within the range of $1.45 billion to $1.6 billion. This outlook comes after Corsair reported net revenue of $1.46 billion for the fiscal year 2023, marking an increase from $1.375 billion in 2022.
These types of figures are dwarfed by many of its peers, so investors could take on a significant opportunity cost if they choose to keep their CRSR shares.
Electronic Arts (EA)
Electronic Arts (NASDAQ:EA) is a leading video game publisher known for titles such as The Sims, Mass Effect and Apex Legends.
While EA has a strong portfolio of popular game franchises and a robust distribution network, its heavy reliance on a few key franchises could be a vulnerability.
A critical component of EA’s results in Q3 2024 was its live service game sales, which accounted for 73% of the company’s revenue. This significant revenue stream came from titles like EA SPORTS FC, Madden NFL 24, Apex Legends and The Sims.
Another point of concern is EA’s reputation within the gaming community. The company has faced criticism over its monetization strategies, including the use of loot boxes and microtransactions. Gamers are becoming increasingly sick of these practices and releasing a new slightly-altered sports game every year for the sake of driving up revenues is becoming old hat and despised.
The main sell case for EA then is the weakness of its brand which will come to a head in the future.
Roblox (RBLX)
Roblox Corporation (NYSE:RBLX) has faced significant stock price declines, with more than a 72% drop since November 2021, which has led to shaken investor confidence. One of the pivotal concerns is Roblox’s escalating operating losses, which doubled from $300 million to over $600 million in the first half of 2023.
RBLX is one of those gaming stocks to sell due to its financial issues, and it may still be overvalued relative to its fundamentals. For example, it trades at a whopping 192 times forward earnings and this is despite its severe capital depreciation.
Besides its fundamentals weakening, it has also been in the business of diluting shareholders, with shares outstanding growing 3.51% year-over-year, so the real losses to investors may be more severe than what’s on paper.
RBLX’s prospects for turning its business around are grim, so it’s one of those gaming stocks to sell.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.