I think video games developers could be some of the best stocks to buy as acquisition action in the industry heats up. Sony has just splashed out $3.6bn to bring software maker Bungie under its control. It follows the $69bn blockbuster acquisition of Activision Blizzard by Microsoft last month.
I wouldn’t be shocked to see suitors line up to acquire London-listed tinyBuild (LSE: TBLD) either. Thanks to popular titles like the Hello Neighbor franchise this particular developer exceeded its own trading expectations in the second half of 2021.
Takeover target?
tinyBuild builds software that can be played across various platforms. This gives the business strength through diversification. Aside from just making games for PCs and consoles the business also has its toe in the mobile gaming segment. This is a segment of the gaming industry that’s being tipped for particularly explosive growth in the years ahead.
According to Statista, smartphone games accounted for 50% of all global video games revenue in 2020. The researcher reckons worldwide spending on mobile games will burst through the $100bn barrier by the end of next year too. tinyBuild is rolling out big-hitting titles (like Secret Neighbor, a spin-off of Hello Neighbor) to exploit the mobile gaming boom, too.
Expensive but exceptional
Like many tech shares, tinyBuild comes with a premium rating attached. At a price of 195p this UK share trades on a high price-to-earnngs ratio of 32.5 times. A hefty rating like this could cause the share price to reserve sharply if growth projections start to look a bit fragile, for example, if one of tinyBuild’s new titles receives a frosty reception and sales flatline.
Still, as a potential investor I’m encouraged by tinyBuild’s strong record of producing well-loved games. Its Hello Neighbor title for example has just broken through the significant 100m-downloads marker. Even if a suitor doesn’t emerge I’m confident this UK share could still make me a heap of cash over the long term.
Making an impact
Before you go I’d like to talk about TPXimpact Holdings (LSE: TPX). It’s a stock you may not have heard of as, until late last year, it went by the name of Panoply. This a UK growth share I’m considering buying as a way to capitalise on the artificial intelligence boom.
Competition among the AI specialists is high. Some of them have colossal budgets to operate with compared with smaller operators like TPXimpact, too. But this UK growth share is no small fry and it continues to build its position through shrewd acquisitions. Its most recent deal saw it snap up digital and cloud-based transformation consultancy RedCortex to capitalise further on the automation revolution.
TPXimpact’s latest financials showed revenues soar 77% between April and September. I fully expect it to continue pulling up trees as companies spend increasingly-colossal amounts to digitalise their operations.