Home Growth Companies 3 Gaming Stocks to Fall in Love With

3 Gaming Stocks to Fall in Love With

Video games have come a long way since the 1980s.

Back then, the idea of video games existed mainly in dimly-lit arcade centres with classics such as Pac Man and Donkey Kong.

Fast forward to the 1990s, and the personal computer made games accessible to a wider audience playing mostly at home.

In the 2000s, the internet elevated gaming to another level with the introduction of online gaming, though this phenomenon did not take off at the time due to slow connection speeds.

By the end of the decade, both internet connectivity and speeds had improved dramatically, thus ushering in a new era for gaming.

Massive multiplayer online role-playing games (MMORPG) have become hugely popular as legions of fans meet up in the virtual world to kill monsters and collect treasure.

The gaming industry has grown by leaps and bounds over the years.

Newzoo reported that the global gaming market generated an estimated US$175 billion in revenue last year.

It projects that the industry will come close to US$218 billion in revenue by 2023, underscoring the growing importance of gaming.

Here are three gaming stocks that you can fall in love with this Valentine’s Day.

Tencent (SEHK: 0700)

Tencent is an internet giant that operates services such as communications and social platforms (Weixin and QQ) in China.

It also has financial technology, online advertising and online gaming arms.

The company is growing rapidly and for its third quarter 2020 earnings, it reported a 29% year on year rise in revenue to RMB 125.4 billion.

Profit attributable to shareholders soared 89% year on year to RMB 38.5 billion.

Tencent’s online gaming revenue grew year on year, with the company’s popular Honour of Kings game clocking over 100 million daily average users (DAU) for the first 10 months of 2020.

Another game developed internally and based on a popular anime intellectual property, Naruto Mobile, achieved all-time high DAU and revenue.

The company has continued pushing out new games in 2020 such as Moonlight Blade Mobile and League of Legends: Wild Rift.

Tencent has also invested in popular games companies such as Ubisoft (EPA: UBI) and Activision Blizzard (NASDAQ: ATVI), owning a 5% stake in each.

Sea Limited (NYSE: SE)

Sea is a homegrown internet company that went public in the US at US$15 per share in October 2017.

Fast forward three years and the company’s share price has multiplied more than 18-fold to US$274, with a market value approaching US$140 billion.

Sea has three main divisions: online gaming under Garena, e-commerce under Shopee, and digital payments under SeaMoney.

The company’s recent third-quarter earnings report showed it is still growing rapidly.

Total revenue hit US$1.2 billion, nearly doubling year on year, while gross profit doubled year on year to US$407.6 million.

Garena is an online games developer with a presence in more than 130 markets.

One of the games developed and published by Garena, Free Fire, was the most downloaded mobile game globally in 2019.

The division also helps to organise e-sports competitions.

E-sports is a multiplayer video game played by professional gamers and viewed by spectators and is becoming an increasingly important sub-segment of the gaming world.

Garena’s largest e-sports tournament in 2019 achieved over 130 million cumulative online views.

Despite to the pandemic, the gaming segment saw revenue grow 73% year on year to US$329.1 million for the quarter.

Quarterly paying users jumped by 78.3% year on year to hit 572.4 million, representing good momentum for the division to continue building up its user base.

Unity Software (NYSE: U)

Unity Software operates a platform for the creation and operation of interactive, real-time 3D content.

Game developers make use of Unity’s software to create and run a plethora of PC, tablet and mobile games.

Some hits from studios include augmented reality mobile game Pokemon Go, developed by Niantic Inc, and Call of Duty: Mobile, developed by Activision Blizzard.

Unity debuted on the New York Stock Exchange less than a year ago at US$52 but has since more than doubled to close at US$125 recently.

The company reported a strong set of full-year earnings. Revenue surged by 42.6% year on year to US$772.4 million.

Unity’s ambition is to deliver revenue growth of around 30% per annum over the long-term.

The company continues to improve its capabilities. It introduced Forma in late-2020, a purpose-built tool that helps to streamline the creation of digital marketing content.

For the fourth quarter of 2020, games made with the Unity engine made up 71% of the top 1,000 mobile games, showcasing the widespread use of the company’s platform.

Another impressive metric — applications built with Unity were downloaded five billion times per month on average, up 41% from a year ago.

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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.