When should investors start trading video game stocks?

 

The realm of gaming has witnessed a remarkable surge in recent times, outshining its counterparts in the entertainment industry. While television sector revenues experienced an 8% decline last year, plummeting to $102 billion, the gaming industry has surged at an impressive annual rate of 10.7%.

The film industry has also felt the overpowering dominance of video games. Previously, games were often based on successful movies, but the tables have turned. Now, movies (and even books) are emerging from popular games, with titles like Angry Birds and Assassin’s Creed leading the way. While other segments of entertainment are grappling with a decline, the soaring popularity of video games is creating substantial opportunities for stock investors.

Profitability of the Gaming Sector

According to Newzoo’s 2018 report on the global games market, there are currently over 2.3 billion active gamers worldwide. Approximately 1.1 billion of them, roughly half, invest money in gaming. What drives millennials to spend increasingly on gaming? The answer lies in the irresistible allure of innovative game developers. In addition to captivating games, the industry has discovered new avenues for engaging audiences, such as eSports and streaming platforms like Twitch, where gaming enthusiasts can watch others play online. Newzoo researchers predict that the gaming industry will reach approximately $138 billion in 2018, marking a 13.3% increase from the previous year. For the first time, mobile gaming is set to account for more than half of the total gaming market revenue, amounting to about $70.3 billion (a 25.5% increase from 2017). The lion’s share of industry revenue is expected to originate from China, with an estimated $37.9 billion in 2018. The United States ranks second with $30.4 billion, followed by Japan at $19.2 billion. In terms of regions, Asia-Pacific stands out as the major contributor, with 2018 revenues projected at $71.4 billion. Key Players in the Gaming Stocks Arena Here’s a look at some of the prominent players in the video game industry that are available for trading on the platform:

Activision Blizzard (ATVI)

As of September 2017, Activision Blizzard reigns as the largest game company in Europe and the Americas in terms of revenue and market capitalization. Their multiplayer first-person shooter, Overwatch, boasts a staggering 40 million global players since its launch in 2016. The company’s three game production units, Activision, Blizzard Entertainment, and King Digital Entertainment, have collectively sold over 500 million copies of their titles, including renowned franchises like Call of Duty, Destiny, Skylanders, World of Warcraft, and more.

Electronic Arts (EA)

Another American gaming giant, Electronic Arts, offers a diverse range of games under various labels, including FIFA, NHL, Madden NFL, and established franchises like Battlefield, The Sims, Medal of Honor, among others. In 2016, Battlefield 1 was the best-selling Xbox One video game of the year, with around 4.32 million units sold. Their product, The Sims 3, is among the top-selling PC games of all time, with over 11 million units sold.

Take-Two Interactive (TTWO)

Ranked as the third largest publicly traded game producer in the United States as of September 2017, Take-Two Interactive has seen its stock soar by more than 60% in the last 12 months. The company’s success is largely attributed to the immense popularity of Grand Theft Auto V, which ranks as the third best-selling game of all time. Other notable titles include NBA 2K, Civilization, BioShock, and the operation of game publishers Rockstar Games, Private Division, and 2K Games.

Gamestop Corporation (GME)

Gamestop is a global gaming titan that offers video games, hardware, consumer electronics, wireless services, accessories, and even operates a monthly magazine, Game Informer (GI). The company is also the largest partner of Apple in the USA and the largest AT&T authorized dealer through its Spring Mobile subsidiary.

NetEase (NTES)

This Chinese conglomerate provides e-commerce, advertising, email services, and is a major player in the development of popular PC-client and mobile games. Their collaborations with Blizzard Entertainment, Microsoft subsidiary Mojang AB, and other gaming companies have led to the release of globally acclaimed titles like Hearthstone: Heroes of Warcraft, World of Warcraft, StarCraft II, and Diablo III: Reaper of Souls. NetEase Games ranked as the second-highest grossing iPhone gaming app publisher globally as of January 2018.

Microsoft (MSFT)

Microsoft is a significant contributor to the gaming industry, providing both games and consoles. Their video game production division, Microsoft Studios, develops and publishes games across various platforms, including Xbox, Xbox 360, Xbox One, Steam, Games for Windows, Windows Phone, and Windows Store. At the latest E3 2018 Briefing, Microsoft announced several creative teams added to Microsoft Studios and showcased 52 games, including console launch exclusives and global premieres.

Sony (SNE)

Sony Interactive Entertainment is responsible for gaming at the Japanese company, bringing PlayStation consoles 1-4 to players worldwide. Their catalog includes beloved games such as God of War and Heavy Rain. Sony has sold over 525.3 million PlayStation consoles worldwide, and to commemorate this achievement, they released the 500 Million Limited Edition PS4 Pro on August 24, 2018. Performance and Benchmarks in the Gaming Sector In 2016, the PureFunds Video Game Tech ETF was introduced as the first ETF focusing on gaming industry stocks. Based on the EE Fund Video Game Tech Index, this ETF comprises 36 publicly traded game developers, chip and console producers. Here’s a long-term performance chart comparing this ETF (ticker symbol: GAMR) against the S&P 500 index: In the short term, gaming industry stocks included in GAMR are under some slight pressure: As the gaming industry continues to evolve, it offers opportunities for both bullish and bearish positions through CFD trading. You can explore various scenarios by selecting from the list of video game stocks and taking long or short positions.

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