Portfolio strengthener or poor simulacrum for real life. You decide.
China’s tech and video game giant Tencent is waking up to a new reality after 2021 brought upon harsh pandemic lockdowns followed by a widespread crackdown on technology companies from local authorities. Tencent’s stock has been battered by a mix of unfavorable market conditions to the point where it lost roughly 20% of its value in 2021. Not only has it failed to recover, but it kept sliding lower in early 2022 – the tech company’s first quarter net profit plummeted 51% to $3.4bn from a year ago. Still, Tencent remains China’s most valuable Internet company and the world’s biggest video game developer.
Call of Duty maker Activision Blizzard is getting the boost of its lifetime – Microsoft announced in January it will acquire the video game publisher in a $69bn merger – the largest buyout in the history of gaming. The news buoyed Activision’s stock at a time when tech names were severely bruised by prospects of higher rates – the biggest enemy of the valuation of forward-looking growth stocks. The gaming giant was among the few tech stocks in green territory for the first half of 2022 with a gain of about 15%. Much like you can’t pause your online game, it seems you can’t put a lid on investor optimism about the future of gaming.
Millennials brace for a nostalgia trip: Super Mario creator Nintendo saw elevated interest in its products during the pandemic. The post-Covid hangover, however, delivered a blow to the company’s performance, resulting in slowing growth and even slower profit projections. The household name in video games surprisingly announced a 10-for-one stock split in May 2022 in efforts to appeal to investor demands for improvement in corporate governance. The company’s stock has been holding strong relative to the broad-based market rout of 2022 with tech losses leading the decline. Nintendo shares were up about 6% for the first half of 2022.
NetEase, a smaller rival to game developer Tencent, aims to expand its footprint from video games to e-commerce, data security, and online music. NetEase, however, appears to be in the grip of Chinese authorities – the broad crackdown on tech companies has hit the gaming industry particularly hard. Take Diablo Immortal, for example. The game was developed in concert with Activision Blizzard and failed to launch in China on its set date June 23, 2022 likely due to a nationalist backlash over a social media post containing Winnie the Pooh – a cartoon blacklisted by censors in China for being used to derisively refer to President Xi Jinping.
Electronic Arts brags a rich video games portfolio with titles such as The Sims 4 and Apex Legends. Missed something? The name that millions of people refer not to the football’s governing body but to their favorite video game – FIFA. In May 2022, EA announced it's ending a 30-year partnership with FIFA after a dispute over the name and unhappy players and clubs seeking a greater cut of the game’s success. Its new name, “EA Sports F.C.”, will be making headlines in 2023 and beyond. Sitting on a $36bn valuation, EA posted strong growth for its fiscal 2021 and delivered upbeat projections with lots of new entertainment on the horizon.
Video-game developer Unity Software is among the pandemic beneficiaries as it saw a boost in player engagement and, more importantly, awareness of the looming metaverse world. Unity has set its gaze on the emerging virtual realm as it’s transitioning from linear 2D to interactive real-time 3D. Since becoming a public company in September 2020, the developer has been averaging a 43% revenue growth year over year. Unity projects its 2022 revenue to land at $1.5bn, or 35% higher than its 2021 figures. The video-game publisher boasts a market cap of roughly $14bn, while its stock got demolished in the first half of 2022 – down more than 60%.
Roblox is a $21bn online gaming company that landed for public trading in March 2021. Still in its early innings as a public company, Roblox boasts 202 million monthly active users. In the fourth quarter of 2021, the company marked a 33% rise on an annual basis in daily active users – nearly 50 million.However, it has so far failed to appease investors – Roblox stock is down more than 70% from its all-time high of $134.72. And that’s after it became popular as a candidate to build out the metaverse. Roblox hit a roadblock in 2022 – the company wanted to crack the 720-million-strong Chinese market but had to take down its app with no warning.
Nexon may not be super popular in the US or Europe, but wait until you see how it commands the Asian market. The Tokyo-based company boasts games including “Dungeon Fighter” and “MapleStory” – two immersive worlds that can take years to explore. On the corporate front, Nexon invested $400m for a 38% stake in production company AGBO that created Netflix hit “Extraction”, among other film projects. Nexon’s expansion into film and TV appears to have assuaged investors as its stock is up about 20% since the announcement was revealed in January 2022. The company has a market capitalization of roughly $18.5bn.
Take-Two is the gaming behemoth you’ve likely never heard of. It is the parent company of major video game publishers Rockstar Games and 2K. Thanks to them we have NBA 2K franchises, GTA, and Red Dead Redemption – the top moneymakers for the company. More recently, in January 2022, Take-Two announced the buyout of gaming group Zynga in a $12.7bn cash-and-shares deal. The acquisition intends to position Take-Two as a frontrunner in the fast-growing mobile games sector of the entertainment industry. Take-Two is valued at $21bn, but its shares have been battered and were 25% off in the first half of 2022.
Bandai Namco will forever be known as the company that gifted the world two of the most treasured toys, especially for those 90s kids – Power Rangers and Tamagotchi virtual pets. The company was founded in 1950 in Tokyo but it wasn’t until 2005 that it became a publicly listed company through a merger between Namco, a leading videogame company, and Bandai, a large toymaker. The move was prompted by the decision to cut costs through diversification. Since then, Bandai Namco shares have increased in value over four times, or 400%, while the company itself is worth around $15bn.
Krafton, a gaming company backed by Tencent, set a record for South Korea’s biggest IPO in the past 10 years after it raised $3.8bn. However, the company knows little about having its stock float in the green. For starters, Krafton’s IPO was a painful entry into public markets – shares fell sharply on its first day due to concerns over its excessive valuation and the stock closed 12% lower at a $19bn price tag. Mid-2022 and the stock’s off by about 50% from IPO price - partly due to pressure from Chinese rivals but also due to the company’s operating profit missing the consensus by more than 80% in the quarter ended December 2021.
Video games maker Konami has been around for more than your average gaming company. It became a publicly traded stock on Tokyo’s exchange in the 1980s. Before that, Konami originated in 1969 as a simple jukebox rental and repair business and today it boasts a market capitalization of roughly $7bn. Some of Konami’s video game franchises include Metal Gear, Silent Hill, and millennials’ favorite Yu-Gi-Oh. Shares of the company are not famous for exaggerated returns. Quite the opposite – the veteran video game maker carries roughly the same stock price it had more than 20 years ago.
You might be surprised to find out that Embracer Group is Europe’s biggest gaming group with a valuation at just under $10bn. Sweden-based Embracer has been using its post-pandemic time wisely – the company has launched itself into dealmaking but has also been subject to the same. Embracer founder Lars Wingefors has made over 60 acquisitions since the start of 2020. Among them is Dark Horse Media, a large independent comic studio. On the other end, Saudi Arabia’s sovereign wealth fund added an 8% Embracer stake to its portfolio after chipping in $1bn. Still, shares struggled to perform as they took a 20% dive in the first half of 2022.
NCSoft is a child of South Korea’s ever-competing gaming industry. Boasting a $7bn valuation, the company resides in the company of those big Korean game makers. More than that, the game publisher behind the popular Lineage series shifted gears full throttle into the fast-emerging non-fungible token space. In late 2021, the company launched its first NFT-based Lineage W as a way to generate more player engagement. Shares of NCSoft, however, have been severely bruised after the global pandemic lockdowns began to loosen up. Since early 2021, NCSoft’s stock has lost about half of its market capitalization.
Japanese entertainment group Koei Tecmo entered the publicly traded markets in 2009 through a merger between, you guessed it, Koei and Tecmo – seemingly a match made in heaven as both brands are involved in the video game industry, among other sectors. The newly-created holding company went through several restructurings resulting in the birth of branches in Europe, Canada, and the US. Shares of Koei Tecmo have been trading relatively stable with roughly a 7% decline over the first half of 2022. In terms of size, the company boasts a market capitalization of about $5bn.
“Let’s team up! Ugh!” says the spiky-haired warrior and Street Fighter poster child Ryu who turns 60 in 2024. Despite Street Fighter being around since 1987, its Japan-based creator Capcom decided Ryu’s birthdate to be July 21 1964. Besides the popular fighting game, Capcom brought us Resident Evil, Monster Hunger, Mega Man, and others. In corporate speak, the company is public, valued at $6bn, and its stock was up 20% in the first half of 2022. With Street Fighter 6 just around the corner and more cool stuff planned, it's no wonder that Saudi Arabia’s sovereign wealth fund acquired more than 5% of the company in early 2022. “So much power!”
French video games publisher Ubisoft is behind household names such as Assassin’s Creed, Far Cry, and Just Dance. But Ubisoft wants more than an action-adventure stealth video game that makes you think you’re the coolest in your class.The company’s focus now is on the emerging tech of NFTs and blockchain. And the first game of Ubisoft’s portfolio to try out NFT items is military shooter Ghost Recon Breakpoint. Let’s see if that catches on. Ubisoft has been around since 1986, public since 1996 through an IPO priced at less than €3. A share today will set you back around €45. In 2021, Ubisoft’s annual sales decreased 4% to €2.1bn.
Square Enix is the producer of the blockbuster Final Fantasy and Dragon Quest series. The company’s focus, however, is slowly expanding from the narrow path of home consoles and gaming in front of a monitor to gaming on any device. You can thank the 5G technology, the pandemic, and blockchain for that. While Square Enix is not buzzing with excitement to put everything on the blockchain, the $5bn worth gaming heavyweight has listed NFT development in its medium-term playbook. Company’s shares have advanced about 50% from their pandemic lows in March 2020 but were fairly flat in the first half of 2022.
Sega Sammy, the company that owns video-game maker Sega, was formed through the merger of Sega and Sammy Corporation in 2004. On the one end, Sega chipped in with arcade and video games, while Sammy provided the Japan-popular Pachinko machines. While individually these companies faced increasing difficulties, the post-merger time helped them grow together, buy out several companies and even create some. Sega Sammy’s stock, however, could use a boost as investors seem rather uninterested. After its IPO in 2004, it has only been in the green until 2007 and then for a short while in 2017.
You likely heard about this company for the first time only after the infamous release of Cyberpunk 2077 in 2020 – messy narrative and a gameplay so crashy it prompted Sony to take it off from its digital store. And to know that it was first teased back in 2013. Thankfully, Cyberpunk 2077 creator CD Projekt has other bestsellers in the gaming space including The Witcher series. On the stock front, shares of CD Projekt have been around since 2013. For the first half of 2022, however, the stock was off by about 50%, knocked by doubts over the company’s ability to remain at the forefront of the industry.
The only thing cooler than playing video games is getting paid for it. That’s what WeMade did for the first time in Korea’s gaming industry. WeMade pioneered the play-to-earn model in 2021 with the launch of Mir4, a fantasy role-playing battle game. The success was so huge, its stock price rocketed nearly 800% in 2021. WeMade revised its operating profit for the year downward by 70%, or $181m, excluding the proceeds from the sale of its digital coin WEMIX. Shares of the company are down 75% from their peak. Still, WeMade plans to develop around 100 games on its blockchain network despite a ban at home for their speculative nature.
A big part of the gaming hub in the Nordics, Paradox Interactive pushes the local industry forward through franchises such as strategy video games Crusader Kings, Stellaris, and Europa Universalis. It became a publicly listed company in 2016 with an IPO priced at $3.96 and a valuation at $420m. Since then, the video game publisher has grown to nearly $2bn in market valuation. Based in Sweden, the company has expanded to comprise nine first-party development studios, including flagship Paradox Development Studio. Since early 2021, Paradox stock has been floating fairly stable near $18 a share.
You might be skeptical of it because it’s a name you've likely never heard of, but this company has more ways than one to surprise you. GungHo is founded by Taizo Son, the younger brother of Masayoshi Son, chairman of SoftBank and the visionary behind the $100bn tech-focused Vision Fund. The younger Son made his fortunes when his GungHo start-up developed Puzzle & Dragons - the world’s first mobile game to generate revenues north of $1bn. The company is also known for hosting the Japanese server of Ragnarok Online. GungHo is now valued at $1.1bn with its stock trading mostly sideways since early 2022.