Playstation or Pints?
Can consumers socialise again and still have time or money for gaming and gambling?
Given the fervour with which the UK (or England at least) seems to have emerged from lockdown this week and perkiness in some UK domestic consumption plays (cf Restaurant Group or Loungers) the market is clearly warming up to the reality that there could be a sharper bounce back in experience-driven consumption.
We have highlighted very high absolute valuations of the travel & leisure sector — Enterprise Valuations sit at all time highs — however this is not the same as thinking about the relative attractions in the context of equity market positioning. What is interesting is that the market is still of the view that the Covid-inspired shift to digital/virtual/gaming is very much alive and well — cf Roblox IPO, Fortnite’s new $28bln valuation and the very recent Applovin IPO.
While we are not in a position to pass judgement as to if this is correct, one thing that does need asking is whether these two are mutually exclusive outcomes in the long run. Do people have the time and money to allocate to both online gaming/gambling while also resuming normal activities like seeing friends or going on holiday? It is no secret that savings rates have ballooned in aggregate, however the income breakdown of those savings reveals something slightly more troubling; that the lower income deciles, where more gambling and gaming predominate (and Reddit investing) have barely benefitted.
We are now well and truly lapping Covid-comps and the familiar refrain of “travel and arrive” might well be more relevant to the gaming space than to the travel sector. A quick glance at the Steam database (where most online gaming takes place) is interesting in that it shows lifetime concurrent players of Counterstrike (the most popular and evergreen online game — one your writer even dabbled in back in the early 00s) is still high vs recent history but some way below the peak from lockdown last year.
As ever there is some skin in the game around these issues for StockViews; we have reinforced our views on Jet2 and its enviable competitive position in a recent report this week, while some of our view on Games Workshop and Future takes the other side of this debate — that time and money can’t be spent on both.
