Gaming was hailed as the future of entertainment over two decades ago. And the industry has lived up to this hype, evolving and growing rapidly into a huge media force, generating more revenue than music and film combined. Factoring in eSports revenue and console sales, the gaming industry is valued at over $300 billion. And with the explosion of mobile gaming, the metaverse surge and the emergence of in-game economics, the industry is now a thriving microcosm that has transformed interactive storytelling.
While the US and China are leaders in this space, the UK is slowly growing into a European powerhouse, with several companies gaining exposure during the pandemic gaming boom. And when it comes to investing in gaming, the UK has an ever-growing list of stocks that have huge valuations and are big global players now.
Gaming stocks are companies listed on an exchange that primarily design, distribute or market video games. This is a broad classification that includes a variety of service providers, software developers, animators and graphic consultants that predominantly deal with the creation, launch and post-release support of video games.
For investors new to the space, this article will serve as a starter guide to six of the biggest gaming shares listed on the London Stock Exchange. These companies have the largest market caps and form the core of the UK gaming industry, giving you a detailed picture of what the top gaming stocks in the UK have to offer.
|Frontier Developments (LSE:FDEV)||£500m||British game developer with licensing rights to huge global franchises like Jurassic World and Formula One.|
|Keyword Studios (LSE:KWS)||£1.96bn||A provider of creative and technical solutions including in-game art and backtesting. Keyword Studios works with industry giants like Microsoft and Electronic Arts.|
|Devolver Digital (LSE:DEVO)||£714m||American video game developer and distributor focused on fast expansion through acquisition.|
|Team17 Group (LSE:TM17)||£772m||British gaming studio with a focus on team-based, party or squad games. Indie giant with a distinct style and huge catalogue.|
|Games Workshop Group (LSE:GAW)||£2.44bn||A revolutionary board game manufacturer that has transitioned to creating popular video game franchises.|
The studio behind popular titles like RollerCoaster Tycoon, Elite Dangerous and Jurassic World Evolution has been a British gaming mainstay for nearly three decades now. Frontier Developments has a multi-pronged strategy that involves licensing rights to popular franchises and also maximising post-release revenue through in-game purchases.
The company gained prominence during the pandemic gaming boom when its share price rocketed over 150% in just one year. But this was mainly due to the fact that a lot of its older releases were being purchased or downloaded again as people were stuck at home. This shows the focus on quality as many of its titles have longevity, something that is rare in the gaming world.
Building on their strategy and success during the first lockdown, Frontier Developments acquired the licensing rights to the first F1 simulator game (launch date: summer of 2022). This is an exciting long-term opportunity for the company to expand its sports portfolio much like Electronic Arts did with the FIFA and NBA 2K series. In the gaming world, this is a huge step ahead because sports simulator games generate steady revenue long after the initial release.
Frontier’s business strategy and recent successes have allowed the company to climb the ranks and become one of the largest gaming stocks listed in the UK.
The company with the second-largest market cap on this list of £1.96bn is not a game developer in the traditional sense. Keyword Studios offers both creative and technical assistance to large gaming studios that outsource aspects of development. And this also means the company avoids the pitfalls that most game developers face. The financial loss from unsuccessful releases is largely avoided, which is why the company’s financials have grown steadily.
The Dublin-based services company has recorded year-on-year revenue growth for over five years, and 2021 was no different. Being an ‘under the radar’ gaming stock, the company has made it clear that there will be no direct game launches under the Keyword Studios banner. But to grow its influence and impact on the sector, the company has acquired over 60 smaller studios that perform a range of operations including dialogue voicing, record labels for in-game music, customer care, marketing, user testing and 3D technology.
Keyword Studios has quickly risen to prominence as an FTSE AIM stock for investors looking to include gaming shares in their portfolios.
This gaming stock listed in the UK is the only big studio with broad exposure to the thriving American gaming market. Based in Texas, Devolver Digital has a very focused business model of building indie games that shake up the market. The company identifies as a developer-friendly platform that gives creators the tools to compete with the big players.
After the success of its Serious Sam series, this studio has been involved with over 50 successful titles, including the sleeper hit Hotline Miami, Carrion, Shadow Warrior and also published the global phenomenon Fall Guys. Devolver Digital is also making a huge push towards metaverse gaming, which is largely considered to be where the industry is headed in the next decade.
This gaming stock was listed on the FTSE AIM index in 2021 and, with its market strategy and global exposure, the company is looking to maximise the potential of indie titles.
Team17 Group has been belting out hits from the 1990s and has a firm hold of the British indie team games market. With popular titles like Overcooked, the Worms series, Hammerting and Blasphemous, the company’s focus on premium, squad-based, pay-to-play games is clear.
The company works with budding indie creators across the globe, and acts as a distributor as well. Over 100 games have been launched under the Team17 banner since the late 90s, and Team17 continues to dominate the party game genre.
Since 2021, the company has also branched out to educational entertainment and gaming apps targeted at children under 13. This is a huge gaming niche and generates a lot of passive revenue. Team17 recently acquired StoryToys, a big name in the edutainment field to strengthen its position as UK’s top ‘edugaming’ company.
The story of Games Workshop is very unique. After humble beginnings as a board game manufacturer in the mid-70s, the company gained global prominence after the success of its miniature wargame Warhammer 40,000. And in the 90s the company made the smart decision to digitise the Warhammer series and release playable computer games as well. Since then, the company has gone on to produce over 50 extremely successful video games playable across every console.
The franchise model is extremely popular in the video game world, and Games Workshop has perfected the art of creating successful sequels. Using its Warhammer series as the blueprint, the company has created multiple streams of revenue and gained licensing rights to other global franchises like The Lord of the Rings as well.
Given its long history, the dominance of a niche category, longevity and huge market cap make Games Workshop a top UK gaming stock.
Gaming stocks might not be for everyone. Traditionally, gaming shares are slightly volatile given the nature of the industry. The industry has become incredibly competitive, meaning even popular releases often get buried. CD Projekt Red’s Cyberpunk 2077 serves as a reminder of how even highly anticipated games with excellent marketing can fail on initial release.
For investors looking at long-term gains from gaming shares, it is wise to look at the biggest shares, catalogue of games, future projects, takeovers and potential collaborations. All these factors cause price fluctuations. It is easy to get caught up in the hype as video game stocks can quickly generate a lot of interest in short bursts.
But with that being said, the industry looks like it is about to take the next big leap in entertainment with virtual world-building and the metaverse. Gaming could become a rewarding avenue for investors who follow the Foolish investing philosophy of being smart and choosing companies with robust values and financials with long-term gains in mind.