The COVID-19 pandemic served as a blessing in disguise for the video gaming industry, which saw a major surge in its consumer base as people spent most of their time at home. Investors’ interest in the video gaming stocks is evident in VanEck Vectors Video Gaming and eSports ETF’s (ESPO) 54.6% gains over the past year compared to the SPDR S&P 500 Trust ETF’s (SPY) 38.6% returns.
As the school summer recess period begins—meaning a break from remote or hybrid classes—children especially are expected to spend much more time on video games. This, along with the increasing availability of online, mobile and browser games, should increase the demand for video games in the near- to midterm. According to a PR Newswire report, the global video games market is expected to grow at a 9.3% CAGR between 2020 and 2027.
Given this backdrop, we think it could be wise to bet on shares of video gaming companies Playtika Holding Corp. (PLTK), Ubisoft Entertainment SA (UBSFY), Spin Master Corp. (SNMSF) and Gravity Co., Ltd. (GRVY). We believe they are well-positioned to gain from the increasing demand for video games.
Click here to check out our Video Game Industry Report for 2021
Playtika Holding Corp. (PLTK)
Headquartered in Herzliya Pituarch, Israel, PLTK is a developer of mobile games. It owns a portfolio of casual and casino-themed games, including Slotomania, Bingo Blitz, House of Fun, Caesars Slots, and World Series of Poker. The company’s games are available on iOS App Store and Google Play Store.
Robert Antokol, PLTK’s CEO said, “Our Boost technology platform powers our best-in-class live operations, allowing Playtika to continually drive fresh content to our players. Our focus on data-driven game management, assisted by our impactful marketing campaigns, resulted in our impressive revenue growth.”
PLTK’s revenue climbed 19.6% year-over-year to $638.9 million for its fiscal first quarter ended March 31. Its operating income grew 15.1% year-over-year to $130.30 million, while its adjusted EBITDA increased 38.6% year-over-year to $258 million. Also, the company’s cash and cash equivalents increased 604.4% year-over-year to $966.40 million.
Analysts expect the company’s EPS and revenue to increase 241.7% and 10.1%, respectively, year-over-year to $0.82 and $2.61 billion in its fiscal year 2021.
PLTK’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Quality. Within the Entertainment - Toys & Video Games industry, PLTK is ranked #1 of 23 stocks. To see PLTK’s ratings for Growth, Value, Stability, Sentiment and Momentum also, click here.
Ubisoft Entertainment SA (UBSFY)
Based in Montreuil, France, UBSFY produces, publishes, and distributes video games for PC, consoles, smartphones, and tablets in both physical and digital formats worldwide. It owns several brands and has a diversified portfolio of franchises that include Assassin’s Creed, The Crew, and Far Cry.
On May 6, 2021, UBSFY announced the expansion of the Tom Clancy’s The Division universe by unveiling Tom Clancy’s The Division Heartland, which is a brand new free-to-play game. The release could drive increasing sales due to the franchisee's popularity.
UBSFY’s IFRS 15 sales increased 39.5% year-over-year to €2.22 billion ($2.71 billion) for the fiscal fourth quarter ended March 31, 2021. Its operating income came in at €289.4 million ($352.81 million) compared to a €59.5 million ($72.54 million)operating loss in the prior-year period. The company’s consolidated net income came in at €105.2 million ($128.25 million) compared to a €124.2 million euros ($151.41 million) net loss in the prior-year period. The company’s EPS came in at 0.85 euro compared to a €1.12 loss per share in the year-ago period.
The company’s revenue is expected to increase 82.2% year-over-year to $733.42 million for the quarter ending September 30, 2021.
It’s no surprise that UBSFY has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Growth, Value and Quality.
Click here to see UBSFY’s ratings for Stability, Sentiment and Momentum as well. UBSFY is ranked #4 in the same industry.
Spin Master Corp. (SNMSF)
SNMSF is a children's entertainment company that creates, designs, manufactures, licenses, and markets various toys, entertainment franchises, and digital games internationally. Based in Canada, SNMSF offers its products under various brands, such as the PAW Patrol, Bakugan, Kinetic Sand, and Air Hogs.
The company completed the acquisition of Rubik's Brand Ltd, owner of the world-famous Rubik's Cube, on January 5. The acquisition has the potential to help SNMSF further expand its product portfolio.
SNMSF’s total revenue increased 39.3% year-over-year to $316.60 million for the first quarter, ended March 31, 2021. Its digital games revenue increased 394.2% year-over-year to $34.10 million, driven by the Toca Life World platform and growth in the Sago Mini subscription user base. The company’s gross product sales increased 21.6% year-over-year to $294.70 million. Its EPS came in at $0.03 compared to a $0.26 loss per share in the prior-year period.
Analysts expect the company's revenue to increase 22.5% year-over-year to $344.33 million for the current quarter, ending June 30, 2021. The stock has gained 152.8% over the past year.
SNMSF’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has a B grade for Momentum and Quality.
Click here to see the additional POWR Ratings for SNMSF (Growth, Value, Stability and Sentiment). It is ranked #2 in the Entertainment - Toys & Video Games industry.
Gravity Co., Ltd. (GRVY)
A developer, distributor and publisher of online games, GRVY is headquartered in Seoul, South Korea and is a subsidiary of GungHo Online Entertainment, Inc. Its principal product is Ragnarok Online, which is a multiplayer online role-playing game. GRVY provides games for game consoles and handheld game units , such as Nintendo DS, Xbox 360 and the PlayStation series.
On March 23,GRVY globally launched a new role-playing game—Ragnarok: Labyrinth. The launch could further boost the company’s revenue in the near- to midterm.
GRVY’s revenue climbed 43.4% year-over-year to KRW 105,059 million ($94.7 million ) for the first quarter ended March 31, 2021. Its operating income grew 169.9% year-over-year to KRW 27,953 million ($24.8 million). Its Profit before taxes came in at KRW 28,620 million ($25.4 million), up 154.4% year-over-year. Also, the company’s net profit increased 154.4% year-over-year to KRW 23,565 million ($20.9 million).
The stock has surged 168.1% over the past year to close yesterday’s trading session at $135.90.
GRVY’s POWR Ratings reflect its solid prospects. The company has an overall B rating. which translates to Strong Buy in our proprietary ratings system. It has an A grade for Value, and a B grade for Growth, Sentiment and Quality.
In addition to the POWR Ratings grades we’ve just highlighted, we’ve also rated GRVY for Stability and Momentum. Click here to see all the GRVY ratings. It is ranked #3 in the same industry.
Click here to check out our Video Game Industry Report for 2021
PLTK shares were trading at $27.59 per share on Wednesday morning, up $0.28 (+1.03%). Year-to-date, PLTK has declined -12.75%, versus a 12.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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