Profits are managing to stay flat, which is good, especially with such a low multiple on the company of around 7x on an FWD PE basis. The relative resilience of the online gaming segment is evident in the Q2 results, with it growing in the mix.īoth are managing to produce QoQ growth, however. Indeed, even in the licensing mode of making money, things aren't blasting off, they already are trending into a plateau. While growth is being sustained by new releases under the Ragnarok IP creating licensing revenue, it's just not very sustainable. We think the probability that these games have rather short engagement periods as people get bored of P2W mechanics and grind-style games on mobile, which is anyway a medium that isn't as dedicated for gaming and generally less engaging, is pretty high. The total revenues aren't growing that fast. We see the shift as Gravity licenses out the IP as of late.
#Ipc gravity lab license
The strategy is to license out the Ragnarok IP to mobile developers who make low-quality pay-to-win 'gacha games' in many instances that really don't stick. What we really don't like is the mobile segment, which is by far the majority of the revenue. It's a bit of a death spiral when that starts to happen over a more protracted period of time. At some point, it will just go into an inevitable decline, especially since MMOs rely heavily on network effects. But it is now in decline, with the game sticking for a few years, which isn't bad, but not forever. Thailand was a major new market that was responsible for most of the delta in online gaming revenues these last years. But China is not such a friendly market for gaming anymore. They are managing to grow this game by introducing it into new geographies, specifically China. People engage with the game much in the same way ageing fans go back to games like MapleStory and even RuneScape, although the Asian influences shared with MapleStory make it a closer comp to RO. Ragnarok Online dominates the 'Online Gaming' segment, and it's driven by nice economics from subscription revenues. Videogames aren't interesting forever, even World of Warcraft became stale after the 5th or 6th expansion. There's not much wrong with this original title, except that it's getting old.
#Ipc gravity lab Pc
There are plenty of fans, and they still play the PC version of the game from time to time. Ragnarok Online is an old MMO that a lot of people hold dear as an accessible game from their childhoods. The cash pile is nice, but you can't just create a new title, especially in a market that is so competitive nowadays. Their strategy is to gather low-hanging fruit rapidly before they rot. Whether it's over or undervalued is less clear, because they have growth and profits for now, but don't invest in this thinking it's a representative videogaming company and should follow broader secular support for games as entertainment. This is not a vibrant videogame company, and its strategy isn't built for long-term growth, just for milking the 20-year-old Ragnarok IP like a cash cow. Gravity ( NASDAQ: GRVY) trades cheaply because it should.
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