Asia Gaming Stocks on Fire With Consumers Stuck at Home

(Bloomberg) -- It's been a super week for the video-game industry, especially in Japan.

A five-fold jump in quarterly profit by Nintendo Co. on Thursday made it the latest among key players in the space to report stellar earnings, thanks to surging demand from consumers who have been stuck at home because of the pandemic.

Equity investors have taken note. Shares of Japanese video-game companies Square Enix Holdings Co., Capcom Co. and Nexon Co. all hit record highs this week on the back of better-than-expected results. Capcom and Nexon have seen their stock almost double in value since Japan's mid-March lows, while that of Square Enix is around 60%.

Nintendo -- which saw its profit smash all estimates on the back of its hit game Animal Crossing -- has seen its stock climb more than 50% from its March low. The company is said to raise its target for Switch production yet again to around 25 million units this fiscal year to keep up with demand.

Earlier in the week, Sony Corp. also reported profit that beat estimates owing to strong appetite for its games products. Shares of the tech giant -- which is said to be anticipating huge demand for the latest generation of the PlayStation gaming console it is preparing to launch this holiday season -- hit a 19-year high.

“Stay-at-home trends are boosting game software and subscription services sales, and the upcoming PlayStation 5 launch later this year could deliver a substantial boost,” Bloomberg Intelligence analysts including Masahiro Wakasugi, wrote in a post-earnings outlook.

Sony's strong results even gave a boost to shares of U.S.-listed GameStop Corp., which jumped as much as 14% in New York trading on Tuesday, as the games retailer is expected to benefit from Sony's new console launch.

Investors will be keenly watching if the stellar performance of Japanese firms extends to China, with results from Tencent Holdings Ltd. due next Wednesday.

The firm is said to be driving discussions to merge China's biggest game-streaming platforms Huya Inc. and DouYu International Holdings Ltd., Bloomberg reported this week, in a deal that would create an online giant with more than 300 million users.

“Tencent may deliver robust sales and operating profit growth as usage of its digital services remain elevated in the second quarter,” BI analysts Vey-Sern Ling and Tiffany Tam wrote in an Aug. 3 report. “The pandemic may also spur quicker adaptation of Tencent's payments, cloud computing and video-conferencing services.

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