According to Statista, the UK gaming industry is worth £6bn and it is only set to grow. With that in mind, is FTSE AIM incumbent Team17 (LSE:TM17) worth adding to my holdings? Let’s take a closer look.
Gaming on the rise
Team17 is a British video game development company with a two-pronged approach. It creates and develops many well-known, premium games, but also partners with smaller independent developers to help them access the lucrative gaming market. As I write, it has over 90 games in its portfolio. Some of its best known titles include the Age of Darkness franchise, and Hammerting.
As I write, Team17 shares are trading for 718p. At this time last year, the shares were trading for 12% higher, at 818p. Many FTSE stocks have experienced their share price’s meandering due to current macroeconomic issues causing a stock market correction.
For and against investing
FOR: Team17’s performance, recently and historically, has been excellent. I do understand that past performance is not a guarantee of the future, however. Looking back, it has seen revenue and gross profit increase year on year for the past four years. Coming up to date, a trading update released in January for the year ending 31 December was good. Performance exceeded management expectations. Full detailed results are due at the end of March and will show just how well Team17 did. Most of the FTSE stocks I am reviewing have a good track record of performance.
AGAINST: Although a lucrative market, the gaming industry is extremely competitive and includes many well known companies that produce blockbuster titles and have done so for many years. Names such as Microsoft and Electronic Arts spring to mind. Team17 is a smaller firm compared to these and could be out-muscled and outmanoeuvred in the long term. Gaining market share from household names is not easy.
FOR: A recent study conducted by global consultancy firm Accenture reported that the gaming industry has seen its numbers increase by half a billion players in the past three years. It is also predicting a further 400m new gamers by the end of 2023. Team17’s continued growth and success in a lucrative, burgeoning market could help boost its performance and any returns I hope to make.
AGAINST: At current levels, the Team17 shares look a tad expensive. It sports a price-to-earnings ratio of 42. This usually tells me two things. Firstly, any growth expected ahead could already be priced in. Next, there is a risk that market issues as well as any negative news could have a detrimental impact on the share price and overall investor sentiment. An example of this would be a flagship game receiving a negative review or reaction.
A FTSE stock I’d buy
Overall, I like Team17 shares for my holdings and would buy them. I keep an eye on growth markets and as a keen gamer myself, it is an industry I like to watch in particular. I like Team17’s approach with its indie gaming market accessibility with partnerships with newer developers. The gaming market is only set to grow and the FTSE AIM incumbent could end up commanding a decent slice of a very big pie, in my opinion. This could lead to increased performance and some nice returns for my holdings.