The state of Video games

A discussion of video game related stocks and what names look good going into 2025

Video games stocks, much like software names, mostly peaked in 2021 before puking in 2022. This was because as people were locked in their homes there was a lack of things to do, so they went out and bought all the games they could find and played them all. Much like how when you eat too much sugary treats your stomach physically rejects more, throwing them up, the general population was disinterested in new experiences in 2022, 23 and early 2024 as they needed a break from gaming.

This has created an environment where while some names look expensive based on 2022 and ‘23 numbers, the space more broadly is ripe for a valuation rerate with the launch of the Switch 2, PlayStation 5 Pro, and the huge backlog of video games that have been in development since before covid finally all start hitting.

Video games are weird in the fact that while they’re the largest entertainment business in the world by at least 2x, Hollywood stocks get 10x the coverage of them. Heck you hear more about music stocks, and stuff like Spotify trades with higher vol than most video game names. If it isn’t Take Two, which is trading based on GTA6 and has been for the last two years, most gaming stocks are just yawned at by the market. This creates easy opportunities if you’re capable of reading a release calendar, or know when a big event is happening where new games will get announced you’re able to front run some easy valuation fixes. As the market will race to fix their stupidity when a hit game is created.

An easy example of this is Pokémon TCG pocket, the new free to play Pokémon trading card game for mobile devices. Dena Co is helping with the tech on the game as they’re a competent mobile developer. The stock (2432.T) had gone nowhere in more than five years then when suddenly when TCG pocket gets released and the market realizes that this Pokémon IP might be a big deal, and the card game might be a huge winner, the stock ripped higher.

(I bet you can’t figure out when the game was released, the stock barely moved).

The stock market is filled with examples of video game stocks being forgotten until ‘oops another massive release happens’ and the market misses it until it's already out. A second example is EA, which is a company I’ve talked about at length here. Even close to 170 I think it’s cheap as I think it’s going to do somewhere between 10.2 and 11 in EPS in the NTM, with a 1.5% buyback and a .5% dividend and earnings growth expected to CAGR at low double digits if my numbers are right.

But forget that, in the chart below I circled the time period when NCAA football 2024 was getting promoted like crazy and got released. This was the first NCAA football in more than a decade. People took off work to play it. ESPN did a whole multi day segment on it. It was huge. It took until the next earnings call for the market to be like “OMG THIS NCAA GAME IS HUGE WE NEED TO BE LONG EA.”

Even if discount the 6 year breakout move, the market missed an easy 15% upside because they simply weren’t paying attention. Instead focusing on trying to catch a 1 - 3% move in Disney or another boring Hollywood stock.

So in today’s piece we’re going to talk about a few video game names that I think have unseen (by the broad market) catalysts. Let’s dive in.