Which mobile game stocks performed best in 2017?

On the up

Mirroring the widespread bullish sentiment experienced by global stock markets in 2017, the games sector also had a very positive 12 months.

Across the 26 majority games companies which started the year as publicly-owned entities in the US, Europe, China, Japan and South Korea, the average return for investors was 63 per cent.

As is often the case, the very best performing companies were small cap outfits for who successful new product or restructuring always has an over-sized impact.

But the biggest surprise of 2017 was it was some of largest global games companies which performed strongest.

Most notable was Tencent, which passed $500 billion in valuation, while Activision Blizzard and Nintendo both broke through the $50 billion market cap, although Activision Blizzard couldn’t maintain that level, ending the year worth $48 billion.

On the up

Indeed, across all 26 companies, the sector added $470 billion in market capitalisation during the year, with almost half of this arising from Tencent. This compares with a market value of around $110 billion for games in terms of annual sales during 2017.

Yet, even in this year of plenty, it’s worth sparing a thought for those companies, which for various reasons, saw their stock price fall during the year - DeNA and Sega Sammy.

Indeed, more generally, Japanese games companies - here shown in red - demonstrated the lowest level of share price growth.

Another broad trend worth noting was the level of new IPOs, with five games companies floating during 2017, and four of these making their debuts in Helsinki or Stockholm.

These were mainly small scale floats. The exception was Netmarble’s IPO on the Seoul Stock Exchange, which was the second largest ever in South Korea.

It was one of the more successful too, with its stock rising post-IPO; something only one other debutante managed, with Rovio, in particular, experiencing a heavy decline.

For the purposes of this article, we’re going take a look at the details underpinning some of the key performers when it comes to mobile games, both positive and negative.

And just remember, past performance is no guarantee of future results, nor should any of the following be considered investment advice.

Click here to view the list »

• 1 Rovio

  

  

  Following the usual rumours about a Tencent acquisition, Angry Birds developer Rovio floated itself on the Nasdaq Helsinki exchange in October.

  The IPO itself was modest, with the company only issuing €30 million in new shares. Instead, it was an opportunity for existing shareholders to reduce their stake, while also giving existing and future staff the path to liquidate their stock options.

  Yet, it didn’t take long for the shine to come off the situation. Despite strong growth in Q3 - revenue up 41 per cent year-on-year - investors didn’t like the company’s decision to increase its marketing spend, which left earnings flat.

  The result was a collapse in Rovio’s share price, down 20 per cent in a day. And this downwards sentiment continued through December, leaving the stock to end the year underwater - or priced lower than the IPO price of €11.50 - not a situation the company’s management will want to continue for long into 2018.

• 2 DeNA Co.,Ltd.

  

  

  When Japanese developer and publisher DeNA announced it would be making mobile games with Nintendo in March 2015, its share price jumped by 50 per cent.

  It was a similar situation in the lead up to the pair’s debut game Super Mario Run in late 2016, with market sentiment taking DeNA stock to its highest level since 2011.

  This enthusiasm quickly evaporated, however, as it became clear Super Mario Run’s ‘free-to-start’ model wasn’t popular with players, nor generating the expected returns.

  Since then, the release of more successful and conventional F2P games such as Fire Emblem Heroes and Animal Crossing: Pocket Camp during 2017 had little upwards impact on DeNA stock.

  December’s rumours Nintendo is considering working with other mobile games companies now looks like the final nail in the coffin for those DeNA investors still holding out for a Halo effect from the partnership, pushing its share price down 15 per cent for the year.

• 3 Netmarble

  

  

  A South Korean powerhouse that took full advantage of the country’s buoyant mobile games market back in those days of Kakao-fueled virality, Netmarble’s decision to IPO in mid-2017 was more contemporary in nature.

  Gaining the  Lineage II  licence from NCSoft enabled it to release the first mobile-version of the classic MMORPG in late 2016 with Lineage II: Revolution proving to be an incredible success, especially in its domestic market, Japan, and other Southeast Asian countries such as Thailand, Taiwan and the Philippines.

  Future sentiment will depend on the game’s longevity in the top grossing charts, both in Asia and in Western markets, where to-date it’s had a solid but not yet spectacular launch.

  It will also be interesting to see what’s next from the Kabam studio Netmarble acquired in late 2016 as its first Netmarble release was the shiny but ultimately disappointing Transformers: Forged to Fight.

• 4 Activision Blizzard

  

  

  Given the success of Call of Duty: WW2 and Destiny 2, and not forgetting the ongoing contribution of the likes of Overwatch and Hearthstone, it might be considered stretching the facts to add the performance of Candy Crush Saga as a significant factor for Activision Blizzard’s strong financials and share price rise - up 67 per cent on the year. 

  Yet, despite being released five years ago, 2017 was the year King finally got to grips with the long-term decline of what admittedly remained a very popular and successful game.

  The result was a renewed focus on in-game events and other methods of engagement, which saw Candy Crush Saga take its place at the pinnacle of Western mobile games success - the number one top grossing game on the US App Store - as King posted consecutively increasing quarterly financials for the first time since 2013.

• 5 Glu Mobile

  

  

  For better and worse, two games characterised Glu Mobile’s financial performance in 2017.

  For better, its interactive interior design sim Design Home continued to power up the US top grossing charts, albeit pushed by a strong marketing campaign.

  Its success as a $100 million annual franchise saw the company increase its full year sales guidance twice, as well as raising expectations Glu Mobile would finally hit breakeven in early 2018.

  For worse, however, there was much market expectation surrounding The Swift Life, Glu’s social media network for Taylor Swift.

  So, despite management statements they expected no revenues from the experimental release, its weak launch hit Glu shares hard in mid December, taking them down 25 per cent in a week.

  Still, for all that drama, Glu stock was up 73 per cent.

• 6 Square Enix

  

  

  With mobile games accounting for around half of Square Enix’s revenues, its strong performance in 2017 - share price up 78 per cent - was generated by the likes of Final Fantasy Brave Exvius, Hoshi no Dragon Quest, Dragon Quest Monsters Super Light, and Kingdom Hearts Union X, all of which do the majority of their business in the competitive Japanese market.

  More significant for the company’s future success, however, was the July release of the MZ-developed Final Fantasy XV: A New Empire.

  Effectively a reworking of MZ’s billion-dollar 4X titles such as Mobile Strike within a Final Fantasy universe, the game has been muscling its way up global top grossing charts as MZ has switched its powerful marketing machine from serving legacy games to its new shiny Square Enix licence.

• 7 Gamevil

  

  

  Gamevil stock was up 93 per cent during 2017 and that despite almost nothing out-of-the-ordinary happening for the South Korean publisher.

  It continues to release RPGs and MMORPGs, many of them based on successful PC games and all of them with a strongly Korean aesthetic.

  This is because the reason people want to buy its stock isn’t about what Gamevil does in terms of its game releases but because it owns a controlling stake in fellow South Korean publisher Com2uS.

  It’s a somewhat confusing situation, especially given Com2uS is worth almost three times more than Gamevil by market capitalisation and only saw its stock rise 56 per cent in the year.

  Yet, underpinning the entire situation is the success of Summoners War, Com2uS’ RPG which hit $1 billion in lifetime revenues in 2017 and will see further commercialisation in 2018 with animation, comics and merchandising, not to forget an ongoing esports initiative and a new MMOG.

  So, it appears to be a case of ‘buy Gamevil stock and get Com2uS for free’. At least that’s the view of South Korean investors.

• 8 Tencent

  

  

  With its stock up over 100 per cent on the year - growth that saw it becoming the first Asian technology company to be worth $500 billion by market cap - 2017 was a significant time for Tencent.

  Yet given the number of industries and companies with which it is now involved, it’s becoming less clear what Tencent is actually all about. It has stakes in Western tech brands such as Spotify, Tesla and Snap, and heavy domestic involvement in banking, online sales, music, books, robotics, ticketing, advertising, even brick-and-mortar retailing.

  Despite this, however, the core of its business remains the distribution muscle it flexes in China thanks to the domination of its social media networks QQ and WeChat/Weixin, both of which are increasingly coming under the scrutiny of central government, at least when it comes to what it views as questionable content.

  As for the bulk of revenues, they come from the PC and mobile games Tencent develops and publishes, including number one top grossing Chinese mobile MOBA Honor of Kings (Arena of Valor), which is an unofficial clone of top PC MOBA League of Legends.

  Of course, Tencent won’t get into trouble for that as League of Legends’ developer Riot Games is yet another Tencent-owned games company, alongside the likes of Supercell and Epic Games.

  And maybe Tencent will add PlayerUnknown BattleGrounds developer PUBG Corp (part of Bluehole) to its portfolio in 2018; it’s already acquired the official licence for two mobile games based on the battle royale phenomenon.

• 9 Stillfront Group

  

  

  The most confusing deal of 2017 resulted in one of the largest share price rise of the year - 148 per cent.

  Small Stockholm-floated outfit Stillfront Group had been building up its scale with deals to acquire small scale niche games developers but ended up itself being acquired by a much larger developer which effectively was looking for an easy way to reverse-list itself.

  At least that’s one view of the deal which saw Stillfront ‘buying’ or merging with German PC/mobile developer Goodgame, a deal that saw Goodgame’s owners paid around $320m in cash and new shares.

  For investors, the result was Stillfront went from a company with annual sales of less than $20 million to one which is predicted to turnover $100 million in 2018, albeit via a process that has saddled the group with a lot of debt and diluted all the existing shareholders.

• 10 G5 Entertainment

  

  

  It’s fair to say not many people, even those in the mobile games industry, know much about G5 Entertainment. But the Sweden-headquartered, Russian developer and publisher has come a long way over the past 11 years since it first floated in Stockholm.

  Originally focused on a large volume of casual PC games, especially hidden object titles, it has reworked its portfolio, swapping out paid downloads and ‘free-to-start’ games for a small number of fully-fledged F2P experiences, growing its sales and profits at a spectacular pace, albeit from a low base.

  The result is a well-run company that now generates well over $100 million in annual revenues and $10 million in net income, 90 per cent of which comes from hidden object titles The Secret Society, Hidden City and Mahjong Journey.

  Whether this performance justifies such a strong rise in share price - 209 per cent during 2017 - is perhaps another matter, though.

  Interestingly, not even the news of legal action - since resolved - between G5 and the developer of one of its key titles - had much impact on such strong market sentiment.

  Sometimes, when a company's star is on the rise, the only way really is up.