Video game stocks did well in the first quarter of 2023. Stocks in the general video game stock index were up 15% while stocks in the DFC Intelligence Video Game Stock Portfolio showed a 20% return between the first week of January through early April. This compares with only a 7% increase for the S&P 500.
Hardware companies had the strongest gains with Turtle Beach (NASDAQ: HEAR) increasing 52% and Corsair Gaming (NASDAQ: CRSR) up 29%. Roblox (NYSE: RBLX) (which is not in the DFC portfolio) had a 49% gain. Along with a sharp increase for Meta, this is an indication that investors have not entirely lost faith in the metaverse.
The stock returns are in line with the biggest 2023 research areas for DFC Intelligence which include consumer spending on hardware and the potential of live service games in an emerging market for immersive and cloud experiences. Products like the portable Steam Deck are a growing hardware opportunity that combines AAA games with portability.
One area that continues to perform is among second-tier game publishers. In the DFC Stock Portfolio, this includes Take-Two Interactive (NASDAQ: TTWO), Ubisoft (UBI.PA) and CD Projekt (OTC: OTGLY). These are companies that have strong brands but have struggled to take full advantage of market opportunities. They are acquisition candidates for large investors looking at the video game space.
Overall investors are starting to realize that the “video game decline” of 2022 was not really that much of a downturn. It was more about the general media looking for headlines. As DFC Intelligence has emphasized, recent industry trends have been positive. Savvy investors are coming on board.