The video games sector is unloved. Shares in the UK video games sector have fallen sharply and have significantly underperformed other small-cap sectors. Some stocks now appear to offer deep value, with mid-single digit ex-cash PEs that are well below pre-pandemic levels. In particular, Devolver, tinyBuild, and Frontier Developments multiples have fallen well below the sector average. We see upside to Frontier Developments’ earnings estimates and Devolver’s depressed multiples.
