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Basket of top gaming companies down this year despite company revenues thriving from higher consumption during pandemic Factors affecting the downturn: – Reopening of economies as vaccines are rolled out – Employment soaring post-lockdown resulting in less gaming consumption Peter Garnry, Head of Equity Strategy at Saxo Group, has analysed the situation as Saxo’s Gaming basket is the worst-performing equity theme year-to-date. He said: “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. “Despite some moderation in gaming consumption 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.

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 NVIDIA 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 looks attractive combined with strong profitability in the 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.”

Equity Theme Basket

Year-to-Date Return (%)

Crypto & Blockchain

103.8%

Cannabis

43.8%

India (GDRs)

32.1%

Logistics

31.5%

Financial Trading

27.8%

3D Printing

21.1%

Commodity Sector

20.9%

Semiconductors

18.4%

Battery

17.4%

MSCI World (USD)

16.6%

Mega Caps

14.6%

Cyber Security

12.2%

Travel

4.2%

NextGen Medicine

2.7%

MSCI EM (USD)

1.8%

Green Transformation

0.3%

E-Commerce

-2.8%

China Consumer & Technology

-9.0%

Bubble Stocks

-9.7%

Gaming

-14.7%

Source: Bloomberg and Saxo Group All trading carries risk.  Any past performance stated is not an indication of future performance.