Games Workshop (LSE: GAW) shares have had a crazy few years. The tabletop games and figurines seller has exploded in popularity. A niche hobby has turned into a household name. What was once an unfashionable (dare I say nerdy) hobby now boasts huge name recognition along with multiple successful computer games and an upcoming tv show starring Superman (Henry Cavill)!
The success has translated to a surging share price too. Ten years ago, Games Workshop shares traded at less than £6 a pop. As I write late on 11 November, they trade at £154.
Even if we exclude dividends from the equation, investors have seen their stake return over 25 times during the period. A £10,000 stake is now worth approximately £275,492. That’s not just one of the best stocks on the London Stock Exchange or the FTSE 100, but one of the very best worldwide!
So what’s next for the company behind Warhammer? Will the good times keep on rolling? Or is the Space Marine universe going to fall out of favour?
Problems
While Games Workshop brands like Warhammer 40,000 have been made into novels, computer games, and soon TV shows, the bulk of revenue still comes from selling tabletop paraphernalia. Demand for miniatures, paints, rulebooks and the like have driven sales over these past 10 years. They now account for around 95% of total revenues.
There’s cause for concern with such an emphasis on retail products. Supply costs have been rising, particularly since all the products are made in British factories. The cost-of-living crisis shows few signs of abating too. That’s not even mentioning the introduction of tariffs to its biggest market in the US.
Outside of the tariffs however, these aren’t new problems. And while inflation and lower discretionary spending have been issues for years, Games Workshop has been thriving regardless. I put this down to excellent stewardship of the firm’s branding and intellectual property. Warhammer is cool, basically, and that has the consequence of getting people to open their wallets.
Licensing
The other side to Games Workshop is its licensing revenues. This accounts for around 5% in most years. But when hit computer game Space Marine 2 sold millions of copies, licensing made up 9% of sales.
This is not only a boost to the top line, but also creates more exposure to the brand as a whole. How many kids enjoy shooting up ‘Tyranids’ with their ”Ultramarines’ and then get into the tabletop side of the hobby? Quite a few, I’d guess. The effect might become even more pronounced if the upcoming Amazon television show is a smash too.
The next 10 years probably won’t be as terrific as the last 10 for Games Workshop shares, but I’d still call the future bright. I’d say this is one stock to consider.
