2 Mobile Game Stocks I’m Watching Very Closely
According to Pew Research Center, 95% of Americans now own a cellphone of some kind. When the latest survey was taken, in February of last year, the share of Americans that owned smartphones stood at 77% — more than double the 35% in the first survey of smartphone ownership in 2011.
But even if you have never felt the need to own a smartphone, you must know about one form of entertainment that has proliferated together with smartphones: mobile games. Ranging from puzzle games to sport-based games to casino to social, mobile games can (and do) provide hours of entertainment to countless people.
This means a set of new opportunities for specialized businesses –and for investors.
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One example is Angry Birds, a puzzle-like game that has been a huge worldwide hit since it first came out in 2009. The game has been downloaded three billion times (in one format or another), while expanding into more traditional gaming platforms such as PCs and gaming consoles. The Angry Birds Movie, meanwhile, grossed over $352 million — and a sequel is slated for release this August.
If this reminds you of the recent success of all the comics-based movies, including the latest record set by Avengers: Endgame (worldwide, the movie grossed more than $1.2 billion in the opening weekend alone), you’re on the right track. Mobile games are a hit-based business, which can make for a spotty revenue stream, similar to other forms of entertainment.
But unlike the movies, mobile entertainment is a young industry whose potential is still unfolding. What that means for Fast-Track Millionaire readers is simple… it’s an industry we’re going to keep an eye on closely.
With all this in mind, here are two relatively young mobile-game companies that I told my premium readers about recently. First, let’s meet the company behind Angry Birds.
Let’s Put This Mobile Game Stock On Our Radar
At first glance, Finland-based Rovio Entertainment (OTC: ROVVF) might seem like a one-trick pony. But can you really blame a company from fully capitalizing on the success of Angry Birds by attempting to build a franchise?
Yes, this is what Rovio Entertainment is doing as a big part of its growth strategy. In addition to launching new Angry Bird games (this year, for instance, has already seen one new game, Angry Birds Dream Blast, which debuted on January 24), Rovio is building the Angry Birds brand and licensing business.
Already profitable — thanks to the Angry Birds success and the smart management of the brand — Rovio has been further investing in its business, from buying other mobile game developers to pouring $3 million into a venture capital fund in order to gain new opportunities and visibility in the startup scene.
Moreover, Rovio is investing in augmented reality (its AR Game, Angry Birds: Isle of Pigs, is scheduled to be released this fall). Plus, Rovio is a majority owner (80%) of Hatch Entertainment, which is developing a mobile game streaming service for mass audiences.
Rovio went public in September 2017 at 11.50 euros per share — and it was quite a rollercoaster ride from that point on. In February 2018, for instance, the shares lost about half of their value as investors expressed their concern that the company might not be able to repeat its Angry Birds success. But at current levels, at around 7 euros per share in Europe and around $7.60 per share for the U.S.-listed shares, the stock looks interesting again. Let’s keep it on our radar.
Could This Be The No. 1 Mobile Game Stock?
A much more recent IPO, Sciplay (Nasdaq: SCPL), is another mobile-game company that looks interesting, albeit a bit overpriced at the moment.
Sciplay, which has only been trading publicly only since May 3, took a different route to its IPO: it’s a spin-off of parent Scientific Games (Nasdaq: SGMS), a game- and lotto-technology company, where it had been a wholly owned subsidiary. After the IPO, Scientific Games received $301 million for the stake it took public while keeping a 17.4% percent minority interest in the business.
SCPL is a leading developer and publisher of digital games on mobile and web platforms, with total revenue that has grown from $168.8 million in 2015 to $416.2 million in 2018 — a compound annual growth rate of 35%.
#-ad_banner-#Over the years, the company has increasingly become a mobile-game business: the mobile portion of its revenue has grown from $109.4 million in 2015 to $323.3 million in 2018, a compound annual growth rate of 44%. Every one of the SCPL’s seven core games (such as social casino games Jackpot Party Casino, Gold Fish Casino, Hot Shot Casino and Quick Hit Slots, and casual games MONOPOLY Slots, Bingo Showdown and 88 Fortunes Slots) posted its highest monthly revenue last year, in 2018.
Sciplay is different from Rovio in several respects. For one, it owns many games, not just one core game. Second, Sciplay’s games are mostly casino-based, and mostly social. Further, Sciplay’s games are free but they also offer in-game purchases — such as additional virtual coins, cards and chips to enable more game play, and the unlocking of additional content and features faster than players who opt to not buy virtual coins, cards or chips.
The number of players who purchased virtual coins, cards and chips in the fourth quarter of 2018 was more than triple the number of players who did so in the first quarter of 2015, although the overall number of players who opt for in-game purchases remains relatively low.
Sciplay’s relationship with Scientific Games is a long-term positive. For one, Sciplay can access the real-world slot and table games content from Scientific Games (for players who like playing land-based slot machines to enjoy some of those same titles in the free-to-play games). Further, Sciplay has access to Scientific Games’ library of more than 1,500 iconic casino titles, including titles and content from third-party licensed brands such as James Bond, Monopoly, Cheers, The Godfather and more. The access to this content, unique to Sciplay, positions it to create more social games down the road.
With an ambitious mission to become the #1 casual mobile gaming company in the world, Sciplay is another company to watch here.
Action To Take
This is a sector with a lot of growth ahead of it. And my Fast-Track Millionaire subscribers and I will be watching closely in the coming months.
While both of these companies are worthy of further research, I’m not ready to classify them as “buys” just yet. If I do, my subscribers will be the first to know. In the meantime, if you’d like to get access to our latest research, go here now.