Investors pummeled stocks in the gaming sector in the last year. They sold ahead of the anticipation that sales of expensive game titles will fall. Consumers need to prioritize necessities over entertainment.
Three companies that have fundamental headwinds are Roblox (RBLX)), Unity (U), and Ubisoft (UBSFY). In Dec. 2022, Roblox posted daily active users of 61.5 million, up by 18% Y/Y. Engaged hours also rose. Unfortunately, the higher activity did not raise its revenue. Revenue fell by around 1% to 6%. Without revenue growth, RBLX stock is not attractive.
Unity (U) is a gaming platform that must contend with the impact of an economic slowdown. It cut 284 workers on Jan. 17, 2023. Last June, it cut 225 jobs. Its acquisition of ironSource pivots Unity’s revenue stream to advertising. During a downturn, ad spending falls. Unity will have fewer staff members to work on product development, hurting its growth.
Ubisoft, based in Paris, France, is approaching a decade low. The firm wrote off EUR 500 million. It canceled three unannounced projects. Previously, it canceled four titles announced last July.
Ubisoft has plenty of cash. However, its strongest titles are losing consumer interest. Assassin’s Creed and Far Cry are burning cash as development work increases.
Avoid Ubisoft stock.