AUS
NZ
UK
CA
USA
IND
Highlights
- The UK’s gaming industry has benefited from the rising number of online gamers and the imposition of stay-at-home orders.
- While some gaming companies have deliberately taken the free-to-play route, others are offering paid subscriptions to increase engagement.
- The recent Chinese crackdown on the tech sector is expected to trigger a temporary effect on the share prices of gaming companies in the UK as a substantial number of investments in the sector are backed by Chinese firms.
The UK’s gaming industry has benefited from the rising number of online gamers and the imposition of stay-at-home orders. According to Cybercrew, the country’s gaming population increased by 63%, and video game consumers spent about £4.2 billion on video games in 2020.
The gaming industry is increasingly pushing for long-term engagement in the form of subscriptions and in-game transactions. Nevertheless, some gaming companies have deliberately taken the free-to-play route to increase traffic and extend engagement. The recent Chinese crackdown on the tech sector is expected to trigger a temporary effect on the share prices of gaming companies in the UK as a substantial number of investments are backed by Chinese firms.
Here we take a look at five gaming stocks with good future prospect.
Keywords Studios Plc (LON:KWS)
Keywords Studios is a technical provider of services and solutions to video game companies. Recently, Keywords Studios acquired AMC RO Studio S.R.L., an art creation studio for video games, for €2.8 million.
Keywords Studios is expecting to report revenues of €238 million in H1 2021, up by 37% compared to €173.5 million in H1 2020. The company expects adjusted profit before tax at approximately €40 million, up by over 80% from €21.7 million in the prior year. As of 30 June 2021, the company reported net cash of €84 million (31 December 2020: €102.9m).
The shares of Keywords Studios gave a return of 32.90% in the last one year to shareholders, and the market cap stood at £2,242.80 million as of 20 August 2021.
Copyright © 2021 Kalkine Media
Team17 Group Plc (LON: TM17)
Team17 is a game developer and content creator, engaged into creation of independent premium edutainment apps and video games specifically for kids. In July 2021, the company announced the takeover of StoryToys for US$26.5 million.
Team17 Group’s revenues rose by 34% year-on-year to £83 million in 2020 compared to £61.8 million in 2019. Its profit before tax increased by 36% year-on-year to £26.2 million in 2020 compared to £19.2 million in 2019. The company’s cash and cash equivalents increased by 47% year-on-year to £61.5 million in 2020 from £41.9 million in 2019.
The shares of Team17 Group gave a return of 11.43% in the last one year to shareholders, and the market cap stood at £1.025.49 million as of 20 August 2021.
Playtech Plc (LON: PTEC)
FTSE 250 listed Playtech is a provider of software solutions for the online gaming and sports betting industry. Recently, shareholders of the company rejected the consortium led by Barinboim Group’s bid to buy Playtech's financial trading division.
The company had announced a significant expansion in the US and Latin American markets. In this direction, the company inked a multi-state and product deal with Greenwood, the operator of Parx Casino.
Playtech reported revenues from continuing operations at €1,078.5 million in 2020, a 25% year-on-year decline compared to €1,440.5 million in 2019. The company’s EBITDA reduced from €383 million in 2019 to €310 million in 2020.
The shares of Playtech gave a return of 10.05% in the last one year to shareholders, and the market cap stood at £1,199.08 million as of 20 August 2021.
Sumo Group Plc (LON: SUMO)
Sumo Group is a developer of video gaming and entertainment software. In July 2021, the company announced a cash acquisition by China-based tech giant Tencent Holdings for £919 million ($1.27 billion).
Sumo Group’s revenues stood at £68.9 million in 2020, an increase of 40.7% year-on-year compared to £49.0 million in 2019. It registered an adjusted EBITDA of £16.5 million in 2020, up by 17.1% compared to £14.1 million in 2019. Sumo’s net cash on 31 December 2020 exceeded management expectations at £6.8 million.
The shares of Sumo Group gave a return of 163.72% in the last one year to the shareholders, and its market cap stood at £838.45 million as of 20 August 2021.
Frontier Developments Plc (LON: FDEV)
Frontier Developments is a developer of gaming platforms for computers and gaming consoles. In June 2021, Frontier Foundry, Frontier Developments’ gaming label, entered into a publishing partnership with Okomotive for FAR: Changing Tides.
Frontier Developments reported revenues of £ 76.1 million in 2020 compared to £89.7 million in 2019. Its operating profit for 2020 reached £16.6 million compared to £19.4 million in 2019. Net cash balance increased to £45.8 million in 2020 from £35.3 million in 2019.
The shares of Frontier Developments gave a return of 28.18% in the last one year to the shareholders, and its market cap stood at £1,056.61 million as of 20 August 2021.
CONCLUSION:
UK gaming stocks are drawing the attention of investors due to the growth in the overall gaming industry despite the pandemic. Online gaming, either in the form of paid subscriptions or free to play games, has been keeping users engaged. The rise in the number of online gamers and game downloads have been pivotal in boosting profits for game developers, thus drawing investors to include gaming stocks in their portfolios.
