The third iteration of the internet, or Web3 as it’s commonly known, is already upon us. For a market that’s expected to reach a valuation of $177.58 billion by 2033, there’s plenty for investors to be excited about in the brave new Web3 frontier, but what does it mean for Wall Street?
While the term Web3 refers to a vast digital landscape driven by a fast-paced, secure environment driven by digital ownership and cutting-edge integrations like those promoted by the metaverse, it’s through gaming that we’re likely to gain our first real taste of the technology and its potential.
At least, this is the perspective of Microsoft (NASDAQ:MSFT) CEO Satya Nadella in the wake of the tech leader’s $68.7 billion acquisition of Activision Blizzard, who said that “gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms.”
With the gaming landscape set to make inroads into the brave new world of Web3, we’re likely to see its most innovative stocks seize the opportunity to grow alongside the technology. With this in mind, let’s take a deeper look into three key opportunities among gaming stocks that could experience growth as the Web3 gaming landscape kicks into gear.
Unity (U)
When it comes to innovative gaming stocks, few are as cutting-edge as Unity (NYSE:U). Already, Unity has made strides in the world of decentralized games with The Sandbox, Decentraland and DOGAMÍ, all of which utilize Web3 components like non-fungible tokens (NFTs), monetization and blockchain.
The stock itself has struggled to recapture its impressive performance during the last cryptocurrency bull market in late 2021, but Q1 2024 revenue of $460.38 million beat expectations by $26.86m and highlights the potential of the innovative gaming firm.
Crucially, Unity has also welcomed a new interim CEO, Jim Whitehurst, in recent weeks and has projected growth through a series of new initiatives for the firm focused on improving customer sentiment and collaboration.
The positive movements under Whitehurst have seen the likes of Wedbush place an ‘outperform’ rating on the stock with an impressive price target of $33.50.
As the industry continues to grow, Unity stands as a key firm to supplement the growth of more impactful games developed through The Sandbox and Decentraland, which also has direct links to the emergence of the metaverse.
Konami (KNM)
Japanese gaming giant Konami (LON:KNM) has enjoyed a strong start to 2024, posting growth of 35.97% in Q1 2024, which was supplemented by first-quarter earnings that surpassed forecasts by 3.2%.
Konami has been no stranger to the burgeoning Web3 gaming landscape and began recruiting for 13 specialist positions in the industry back in 2022 with the intention of making inroads into the new frontier.
Last year saw Konami enter the world of blockchain gaming with the announcement of its title, Project Zircon, which is a massively multiplayer online (MMO) game built around a vast community of players that features NFT trading.
Project Zircon appears to resemble a foray into metaverse gaming for Konami, and its popularity is likely to carry a direct impact on the scale in which the company embraces Web3 gaming in the future. For a gaming studio that has a track record of innovation and beating expectations, KNM could be a smart portfolio addition for investors.
Coinbase (COIN)
In terms of 2024 performance, Coinbase (NASDAQ:COIN) is already a stock to watch. As a firm that operates primarily as a cryptocurrency exchange, the stock forms a tight correlation to the performance of crypto markets. As a result, buying Coinbase stock is akin to betting on the market capitalization of crypto, and the 69% growth posted in Q1 2024 by COIN as a result is unsurprising following Bitcoin’s strong start to the year.
But Coinbase has a trick up its sleeve to secure growth beyond its crypto correlations: the firm has been investing heavily in Web3 gaming.
Coinbase Ventures has sought to build a thriving Web3 gaming ecosystem and counts projects like Ancient8, Avalon, and Azra Games, among many other major industry-relevant investments within its portfolio.
The platform itself is also likely to be an essential tool as the Web3 gaming landscape grows. The launch of Coinbase’s Web3 wallet can pave the way for the storage of NFTs and game-specific digital assets like currencies to support ownership and is committed to simplifying access to the latest iteration of the internet.
Iconic Wall Street investor Cathie Wood, CEO of Ark Invest, counts COIN as the largest holding in her investment firm’s portfolio and has specifically highlighted the stock as a key beneficiary from the return of a Bitcoin bull market in the near future. This makes Coinbase a stock that commands attention throughout the retail landscape and beyond.
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.