This Stock Surprised Everyone, Except…

Jul 11, 2021

The gaming sector boomed in 2020, valued at $117.8 billion. That’s +23% growth year-over-year.

Wow.

LikeFolio closely tracked key names in the industry, picking up on massive consumer tailwinds last spring.

Not only were gamers gaming more, but new gamers were coming to the table.

First-time gaming mentions are still +77% higher versus 2019.

But generic gaming, i.e., overall game play, has actually decreased 10% year-over-year, according to LikeFolio macro-trend data.

Which leads us to the key question: Can the influx of new gamers outweigh the drop in gaming frequency?

LikeFolio data suggests these trends are impacting companies differently.

Roblox (RBLX) is a clear long-term winner of gaming trends.

This company takes a much different approach to gaming, allowing any of its users to develop and publish new games to its platform for others to play.

This decentralized approach gives the company several advantages over traditional peers like Activision (ATVI) and Take Two (TTWO), which rely on in-house development and “all-or-nothing” launches of new games.

This differentiation is paying off for Roblox, as we see Consumer Demand for the company’s platform +155% higher vs. 2019.

We featured Roblox in our May “Early Reopening Outliers” report because of its unique decentralized model, explosive growth, and relative outperformance versus peers.

And boy, were we right.

Shares closed +21% higher the trading day following its first report as a publicly traded company.

We doubled down on our bullish outlook a week later, and shares traded as much as +33% higher.

Aside from Roblox, ATVI is outperforming TTWO, bolstered by success with its Call of Duty franchise.

ATVI also has the highest levels of consumer happiness in the space, at 66% positive.

Playing it from here…

From a short-term perspective, all names in this space are experiencing some summer-induced weakness as entertainment options open back up.

If we had to rank the horses in this race, according to Consumer Demand growth, we’d place RBLX in the lead over ATVI, with TTWO bringing up the rear.

LikeFolio clients got ahead of RBLX’s big run thanks to consumer insights, and you can be sure we’ll continue to monitor these trends for any shifts that could create more profit opportunities for investors.

Enjoy,

Andy Swan,
Founder, LikeFolio