Most video game companies show losses on the New York Stock Exchange during 2022, after the sector reached record highs last year, amid the Covid-19 pandemic.
The companies have been pressured by fears of an economic slowdown as well as inflationary pressures, which normally weigh on their sales, analysts said.
Roblox – an online platform that allows users to create their own virtual worlds – is the company that has lost the most so far this year, as its titles plummeted 59.77% to $41.50 a share at the close of Monday.
Take-Two Interactive, which owns the studios that designed the crime game Grand Theft Auto, drops 29.48% to $125.32 a title, followed by Microsoft -maker of Xbox consoles- which falls 16.88% trading at $277.75 each. .
For its part, Electronic Arts (EA), creator of the famous soccer game FIFA, has a slight decline of 2.60% to 128.12 dollars per share.
Together, these four companies in the sector accumulate a loss in market value of 479,703 million dollars.
“The video game sector is one of those that have the greatest relationship with economic cycles, this is because they are products that are not essential and in environments of economic uncertainty and high levels of inflation, the consumer tends to reduce spending on this type of product, reducing sales in the sector,” said Kevin Ortiz, an independent analyst in the technology sector.
Roblox reported a 4% annual drop in a key sales indicator for investors in April-June 2022. In the case of EA, it had negative cash flow of $78 million.
Ortiz stated that Roblox trades at a higher multiple than the rest of the companies in the sector. “This price is the result of its high projected growth, however, in periods of lower economic growth it differs drastically from the projected one, which results in a drop in the share price,” he explained.
Activision Blizzard stands out, whose papers rise 20.60% to 79.76 dollars each, driven by the purchase made by Microsoft of the developer of titles such as Call of Duty.
“The rise of Activision Blizzard is a result of the acquisition offer made by Microsoft. Since being a highly renowned company, the offer made has a certain solidity, added to this, the offer that was made was for 95 dollars per share, which is a price even above the current one, “said Ortiz.
The acquisition is expected to close next year; approval from US regulators is still pending.
EA shares hit an all-time high on February 2, 2021, when they closed with a trading price of $147.83, while Take-Two and Activision did so on February 8 and 12 of the same year, respectively, in $213.34 and $102.70 each.
For their part, Microsoft and Roblox touched their maximum prices on November 19 of last year, at 340.88 and 134.72 dollars, respectively.
They are recovering
Despite losses for the year, the sector has recovered slightly so far in the second half of the year, as have the big technology companies and the US stock market in general.
As of June 30, all five companies have posted positive returns, with the biggest recovery for Roblox, at 29.88 percent.
Microsoft picks up 8.38%; EA rises 5.32%, while Take-Two Interactive advances 2.28% percent.
For its part, Activision Blizzard increased profits in the year, with a slight rise in the price of its papers of 2.44% in the second half of the year.
“Being a cyclical sector, we expect to see a recovery once the global economy starts to show good results, which could happen at the end of this year or until next year,” concluded Kevin Ortiz.