Design Your Portfolio of Gaming Stocks and ETFs September 7, 2021

Design Your Portfolio of Gaming Stocks and ETFs

Despite its size and meteoric growth, the video-game industry still has room for development. It has been identified by many as one of the few winning sectors in this pandemic. For the past two years, business shutdowns and social distancing have limited people’s entertainment options, driving them to play video games at home.

Game downloads across the world spiked during lockdowns. Companies such as Nintendo (NTDOY) and Electronic Arts (NASDAQ: EA) are among the leading video-game companies that have reported revenue growth due to increased consumer interest globally.

Below are three of the recent fastest-growing video-gaming companies:

Video-gaming stocks
Stock price (US$)(27/08/21) Market Cap (US$bn) EPS Revenue growth (%)
Enthusiast Gaming Holdings Inc. (EGLX) 4.28 0.676 -0.32 333.2
Activision Blizzard Inc. (ATVI) 116.345 64.11 3.34 24.6
Take-Two Interactive Software Inc. (TTWO) 214.625 18.51 5.61 9.2

Source: www.poems.com.sg

Enthusiast Gaming Holdings (NASDAQ: EGLX)

Founded in Canada, Enthusiast produces video games and hosts eSports events on social media. It uses its platform to connect eSports and video-game fans worldwide.

2Q21 was an exceptional quarter for Enthusiast, which expects further sequential revenue growth and margin improvements through the rest of the year. This would be driven by momentum in its direct sales and pipeline of acquisitions.

Activision Blizzard (NASDAQ: ATVI)

ATVI has three main divisions. It is the largest video-game software company in the video game sector by revenue.

Playstation, Xbox and PC games are just a few of the interactive entertainment titles it develops, publishes and distributes. Its main franchises include World of Warcraft and Call of Duty.

ATVI’s video-game properties are ranked among the most valuable in the industry, contributing heavily to gaming’s growth and development. The company has released multiple successful games under CEO Bobby Kotick’s leadership and has consistently distributed dividends since 2010.

Take-Two Interactive Software (NASDAQ: TTWO)

Take-Two develops, publishes and markets interactive entertainment for consoles, personal computers, smartphones and tablets. Playdots, Rockstar Games, Private Division, 2K and Social Point are some of its game development and publishing ventures.

A stellar performance by its core franchises has boosted its valuations rapidly. Its Grand Theft Auto series is one of the most profitable in gaming entertainment. This series is also the company’s biggest and most important product to date.

Take-Two’s Red Dead Redemption series has received accolades while its NBA 2K basketball series is a leading sports game. That’s not all. Helping to drive growth are smaller series and other development programmes.

Take-Two’s top franchises consistently deliver exemplary products in the complex and resource-intensive world of game development. This is thanks to the company’s repeated ability to delight players and generate high levels of engagement and in-game spending. As a result of its strong financials, Take-Two has also been able to pursue growth opportunities in mobile games and eSports.

The following are the three best-value video-game stocks on our watchlist. They have the lowest P/E ratios in the video gaming industry.

Best-value video gaming stocks
Stock price (US$)(27/08/21) Market Cap (US$bn) P/E ratio
Nintendo Co. Ltd. 353.86 62.07 13.22
SciPlay Corp. (SCPL) 18.75 2.35 121.62
The9 Ltd. (NCTY) 14.99 0.176 0.89

Source: www.poems.com.sg

Nintendo (NTDOY)

NTDOY is a Japanese multinational consumer electronics and video-game company. In addition to portable and console game machines, it makes software, mobile devices and consumer electronics. NTDOY is well known for its game consoles Nintendo Wii, Nintendo DS and Nintendo 3DS.

SciPlay Corp. (NASDAQ: SCPL)

SCPL develops and publishes digital games for mobile platforms and the web. In addition to casino games, it offers casual and bingo games such as MONOPOLY SLOTS and Bingo Showdown.

The9 (NASDAQ: NCTY)

NCTY is a Chinese Internet company specialising in mining cryptocurrencies and developing proprietary or licensed online games. It offers mobile, TV and online virtual community games.

For investors who are interested in ETFs, the following are three that invest in video-game and related equities.

The first is the Wedbush ETFMG Video Game Tech ETF (GAMR). Started in March 2016, one of its top holdings is WeMade, a publisher of video games in South Korea. Another is Roblox (RBLX), a US-based video-game platform.

NERD (Roundhill Bitkraft Esports & Digital Entertainment ETF) began trading in June 2019. Its top holdings are Corsair Gaming (CRSR) and Activision. As well as Modern Times Group, Tencent and Turtle Beach (HEAR), NERD holds stakes in companies like Modern Times Group, a Swedish digital entertainment firm.

The VanEck Vectors Video Gaming and eSports ETF (ESPO) has been trading since October 2018. Top holdings are graphics chip maker Nvidia (NVDA), Singapore-based Sea (SE) and Tencent. Additionally, it owns significant stakes in Nintendo and Advanced Micro Devices (AMD).

The world loves entertainment of all sorts and video games are a particularly compelling form of entertainment. Over the next few years, video games will likely continue to grow in popularity globally, allowing game publishers to expand in both developed and emerging markets by reaching new players.

Some video-game companies may not be able to continue creating successful franchises, but those that can help to develop the industry further will likely reap the greatest rewards. It may be worth the while of investors to keep in touch with this industry.

References:


Contributor:

Design Your Portfolio of Gaming Stocks and ETFs

Stephen Ong
Investment Specialist, Phillip Securities Pte Ltd
Senior Account Executive, Phillip Futures Pte Ltd
(a member of PhillipCapital)
Email address: stephenongch@phillip.com.sg

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About the author

Design Your Portfolio of Gaming Stocks and ETFsDesign Your Portfolio of Gaming Stocks and ETFs

Stephen Ong
Investment Specialist, Phillip Securities Pte Ltd
Senior Account Executive, Phillip Futures Pte Ltd

Stephen services a portfolio of diverse clients, offering them actionable financial insights on multiple asset classes. He has over 20 years of experience in stocks, FX, CFDs and derivatives, providing advice on how best to implement successful trading plans. Stephen has also developed versatile trading strategies for stock markets with the application of statistical models and trading systems on company stocks. He holds a Bachelor in Business Administration and has won accolades for his work as a Phillip CFD specialist. He is a regular contributor of stock analysis and commentaries to Phillip Futures Market Research and a market commentator for FM 95.8 and FM 96.3.