Börse Frankfurt-News: “Gaming stocks an alternative to big techs” (foreign stocks)
FRANKFURT (DEUTSCHE-BOERSE AG) – Many gaming stocks have lost with the setbacks in the tech sector. The industry continues to grow enormously. A lot of money can be made not only with games, but also with the appropriate equipment.
April 21, 2022. Frankfurt (Frankfurt Stock Exchange). They are called World of Warcraft, Grand Theft Auto or Call of Duty – computer games are more popular than ever. In Germany, sales in the gaming market increased from 2.4 to 9.8 billion euros between 2012 and 2021, according to the Game industry association. It’s no longer just pubescent boys who gamble in their children’s rooms. According to the association, only 23 percent of gamers are under 20 years old, 19 percent between 50 and 59 years, and 10 percent even between 60 and 69 years. According to Bitkom, the industry association of the German information and telecommunications industry, girls and women now make up almost half at 47 percent.
Action: “Fluctuations are likely to remain large”
This can create many opportunities for investors. “There are three areas of the technology industry with potential that is above the market average: artificial intelligence (AI), virtual reality and gaming,” says Marc Richter from Baader Bank.
The biggest player in the gaming market is Activision Blizzard (US00507V1098) from Santa Monica, California. The company is behind some of the world’s most successful games, such as World of Warcraft and Call of Duty. “World of Warcraft’s ninth expansion, announced this week, has received rave reviews,” said Richter. “Sales are likely to continue to rise.”
The biggest topic at the moment, however, is that Microsoft surprisingly announced the takeover of Activision in January. As a result, the share price rose, on the Frankfurt Stock Exchange it is currently 73 euros after less than 60 euros at the beginning of the year. But the deal isn’t done yet. “The shareholders and the competition authority still have to agree.” Until then, the fluctuations are likely to remain large, says the trader.
“Microsoft uptrend intact”
The Xbox group Microsoft had already bought a lot in the gaming industry in recent years, and with a successful takeover of Activision it would become the largest video game company in the world. “Microsoft may be an old company, but it’s always rejuvenating itself,” notes Richter. The company is highly profitable, pays dividends and is involved in many future-oriented industries. The stock (US5949181045) is somewhat weaker after the highs in November 2021. “But the long-term upward trend is intact.”
Hitting the bottom at Take-Two?
The New York company Take-Two Interactive (US8740541094), founded in 1993, is known for games such as Red Dead Redemption, Borderlands and Grand Theft Auto. “Take-Two is growing strongly, expecting 3.4 billion paid bookings this year and 5.5 billion in 2025,” reports Walter Vorhauser from Oddo BHF. In January of this year, Take-Two made an offer to buy game developer Zynga for a whopping $12.7 billion. “The deal isn’t through yet, but it would be a good fit.” After a rapid increase in previous years, the share price has developed rather weakly since the beginning of 2021. “The technology industry is heaving under rising interest rates,” explains Vorhauser. In his estimation, Take Two could now have bottomed out.
Razer, Corsair, Nvidia: Gaming suppliers with potential
The Californian company Razer offers mice, keyboards, laptops and equipment for gaming and work. “The stock (KYG7397A1067) has come under pressure with the technology industry, but has recently confirmed itself,” notes Vorhauser. The company, with its high-end products for gamers, is benefiting from the industry’s strong growth. This also applies to Corsair Gaming (US22041X1028). Corsair, also from California, offers high-performance storage, but also compatible keyboards, mice and headsets for Xbox consoles.
The US semiconductor manufacturer Nvidia (US67066G1040) has not yet reached the highs of November again. Nvidia is benefiting from the high demand for chips for AI and graphics cards, including for the gaming industry. Gaming revenue for the quarter increased 37 percent to $3.42 billion. “The company has received a lot of advance praise,” explains Richter. He assumes that the higher interest rates are now priced in. “The need for chips is huge.”
If you want to bet on the entire industry, you can also do this with an ETF, the VanEck Video Gaming and eSports (IE00BYWQWR46). Launched in June 2019, the ETF offers access to a diversified portfolio of esports and video gaming companies. Top ten positions are currently Nvidia, Tencent, Advanced Micro Devices, Activision Blizzard, Nintendo, Netease, Sea, Unity Software, Electronic Arts and Nexon.
“Industry crisis-resistant”
“In the technology industry, the wheat is currently being separated from the chaff,” Richter observed. The industry tends to weaken because of the increased interest rates. Companies like Netflix with recent disappointing quarterly figures would be severely punished. However, companies with solid business models, cash flows and dividend payments could buck the trend. “The gaming industry is crisis-resistant.”
“The industry still has a lot of potential,” Vorhauer is also convinced. Interim fluctuations would have to be taken into account, as is currently the case due to the rise in interest rates. But now the bottom can be found. “Gaming stocks could be an attractive alternative to the big tech companies.”
by: Anna-Maria Börse, April 21, 2022, © Deutsche Börse AG
Anna-Maria Börse is a financial and business editor with a focus on the financial market/stock exchange and economic issues.
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