Reopening and China are causing moderation in gaming Reopening and China are causing moderation in gaming Reopening and China are causing moderation in gaming

Reopening and China are causing moderation in gaming

Equities 5 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  In today's equity update we take a look at the gaming industry which is currently experiencing a setback in equity markets as sentiment has soured a bit on the Chinese gaming crackdown and stagnation in gaming consumption in the developed world as economies are reopening. The question is whether this year's setback is a buying opportunity. Given the industry's profitability and long-term outlook we remain positive on the industry and our view is that investors should consider increasing exposure to gaming.

Our gaming theme basket is the worst-performing theme this year down 14.7% driven by a moderation of gaming consumption driven by the reopening of economies as vaccines are rolled out and employment is soaring. China’s gaming crackdown has also caused Chinese gaming companies to experience lower share prices as investors are uncertain of the long-term impact. One of potential regulatory changes rumoured in China is time restrictions for kids under 12 with the limit set to one hour on weekdays and two hours during weekend days and holidays. NetEase, one of China’s largest gaming companies, is expected to report earnings on Friday.

Despite some moderation in gaming consumptions and investors taking profit, the long-term outlook remains strong with a recent PwC report highlighting that gaming and esport growth is expected to grow 32% from 2021 to 2025. With gaming being very profitable for those with hit games the profit margins are luring new entrants into the industry. Netflix is branching into gaming with its large user base which could increase competition for other existing companies and squeeze smaller players with less distribution. This TV interview with Take-Two Interactive CEO is a good rundown of the current industry trends.

Our gaming basket is showing healthy revenue growth of 30.3% and EBITDA growth of 43.6% y/y, and analysts have not reduced their price targets much despite falling gaming stocks with the median price target being 36.6% above current prices suggesting strong sentiment. The video card manufacturers NVIDA and AMD are among the few gaming related companies with either a negative or low price target relative to the current price as the semiconductor constraints are now becoming a constraint on revenue growth for these two companies. We remain positive long-term on the industry and the overall valuation picture also look attractive combined with strong profitability in the industry, so the recent setback could be an attractive time to look for exposure to the gaming industry. The key risks are naturally stricter regulation out of China, stronger pace on employment reducing gaming consumption, and higher interest rates impacting valuations negatively.

NameSegmentMarket Cap (USD mn.)Sales growth (%)EBITDA growth (%)Diff to PT (%)Return 5Y
Tencent Holdings LtdMobile games597,12927.7745.049.7161.1
NVIDIA CorpGraphics card496,80552.7372.9-1.21,185.5
Sea LtdMobile games155,731101.14-46.16.9NA
Advanced Micro Devices IncGraphics card129,15745.0591.44.51,482.2
Activision Blizzard IncVideo games64,54224.6145.638.5108.0
Nintendo Co LtdVideo games62,61734.4280.039.3168.4
NetEase IncMobile games61,29424.3512.845.7138.9
Electronic Arts IncVideo games38,9961.66-
Bilibili IncE-sport streaming30,82277.03-256.875.5NA
Unity Software Inc (*)Graphics engine30,23542.58-69.519.5NA
Take-Two Interactive Software IncVideo games18,6069.1930.133.3286.3
Nexon Co LtdVideo games17,20517.9017.444.2205.9
Embracer Group ABVideo games10,52671.91112.067.9NA
Playtika Holding CorpMobile games10,07725.64-7.354.9NA
Zynga IncMobile games8,81249.42-16.049.4204.5
Konami Holdings CorpVideo games8,2843.75-
Ubisoft Entertainment SAVideo games7,32839.4469.335.837.7
Capcom Co LtdVideo games7,22416.8145.936.6520.2
Square Enix Holdings Co LtdVideo games6,99624.7936.310.7111.2
Kingsoft Corp LtdVideo games6,82727.9831.760.9163.4
CD Projekt SAVideo games4,302310.32554.27.1395.4
Keywords Studios PLCGame consulting2,90214.4253.013.9692.1
Corsair Gaming IncHardware2,63955.16244.741.0NA
HUYA IncGame streaming2,60130.33142.895.8NA
DeNA Co LtdMobile games2,30312.84NA17.2-27.4
Stillfront Group ABVideo games1,970102.90108.6103.6733.3
Paradox Interactive AB (*)Video games1,87339.1343.634.9167.0
GungHo Online Entertainment IncVideo games1,760-2.519.624.6-17.8
DouYu International Holdings LtdGame streaming1,18731.84NA114.3NA
Aggregate / median values1,790,74930.343.636.6167.0

Source: Bloomberg and Saxo Group
* Peter Garnry owns shares in these companies

Our gaming basket has been reduced to 29 stocks as Glu Mobile was acquired in April by Electronic Arts. All our theme baskets are annually updated in January unless a major IPO warrants an inclusion so the gaming basket will run in a reduced size until then.



The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged foreign exchange trading); Type 4 Regulated Activity (Advising on securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.