Gravity Stock Forecast

The Great Depression completely changed life from its foundation for the average person, as households embraced frugality across all income brackets.

It’s something that occurred in a much different way during the 2020 economic crisis caused by the novel coronavirus.

As people worldwide were ordered to remain home, we dug into streaming entertainment, especially video games.

In fact, we played so many video games that developers like Gravity Co., LTD (NASDAQ:GRVY) reported strong earnings and a healthy recovery from the initial impact across the entire market.

Gravity is a 20-year-old Korean game development company that’s best known for its Ragnarok massively multiplayer online role-playing game (MMORGP) series.

The games generated so much revenue this year that the company outperformed the S&P500 in the aftermath of COVID-19. Let’s take a look at the Gravity stock forecast to determine whether it’s a good investment for those just now jumping on board.

Gravity = Korean Video Game Developer

If you’re not familiar, Ragnarok is an uber popular manhwa (the Korean term for comics) that blends Norse mythology with a variety of fantasy elements. Much like History Channel’s Vikings TV series, it also blends in Christianity and other cultural elements.

Ragnarok Online launched in August 2002 on Windows PCs, and it spawned a variety of sequels across PC and mobile platforms, along with an animated series. It also launched about a dozen non-related titles for each platform, but this franchise is the main draw, which is both a strength and weakness.

Gravity’s most recent releases are Ragnarok M: Eternal Love, another installment that captures the feel of the original while pulling in new audiences and Ragnarok Origin, which hit the top 5 in Korea’s App and Play Stores upon its July 2020 release.

Although the same franchise, the initial sequel wasn’t well received in the 2010s, so the company’s revenue hinges on these games for this year.

North American Activision Blizzard’s (NASDAQ:ATVI) MMORPG legend World of Warcraft is arguably the most successful MMORPG of all time, and it has a much different strategy.

Not only does Blizzard have other IPs (Starcraft, Overwatch, Heroes of the Storm, Diablo, etc.), but it still maintains the same servers for its original WoW launch, simply adding new expansion packs to the same world. This begs the question of whether this stock is a buy.

Is Gravity Stock A Buy?

While North American audiences are only mildly aware of Ragnarok, it has a cult following in Southeast Asia. When the coronavirus hit, countries like South Korea were among the first to react, although Korea notably didn’t shutdown.

Instead, the company pushed forth social distancing measures that were naturally integrated into a society that already enjoyed streaming entertainment and gaming. This helped catapult the latest Ragnarok releases to the top of the charts.

The company is also partnered with TikTok’s Chinese parent company ByteDance to develop and release Ragnarok X: Next Generation across Southeast Asia. Because MMORPGs have a ton of revenue streams, it’s easy to see how the company can be seen as a cash cow.

With consumer sentiment in 2020 leaning toward nostalgic, it’s a good bet that we’ll see a resurgence of Ragnarok, especially with streaming services like Netflix and Disney Plus loaded with supplemental Norse mythology.

Of course, that doesn’t mean there aren’t associated risks. By the time you’re reading this, the stock could already be at its peak, considering it’s been hitting all-time highs all summer.

Will Gravity Stock Fall?

Video games is a big business, with over 2.7 billion gamers spending over $70 billion on them each year in the 2010s.

Not only is playing games a hobby, but with esports leagues and streaming services like Twitch, it’s a more normalized profession than ever before.

Many universities even have esports teams, and that’s good news for anybody who loves video games as an art form and industry.

Not everything is rosy for Gravity nor Ragnarok though, and Loki made a tricky situation for the company’s partnership with ByteDance. The company became the focal point of U.S.-China relations due to government monitoring code hardwired into its popular TikTok app.

In fact, Chinese companies like Huawei are being banned from cell networks as the world upgrades to 5G, and this partnership could prove divisive in promoting the next mobile release.

Gravity also has a painfully shallow lineup of IP that all but drops off in popularity after Ragnarök. Without much of a safety net behind it, the IP risks falling victim to shifting trends, cancel culture, and other problems.

It’s always safer to have something else on deck for the next big thing when your flagship falters – Nintendo, for example, has Kirby, Donkey Kong, Zelda, and others to draw in anyone who doesn’t like Mario. This brings questions about Gravity’s competition to the forefront.

Gravity Has Stiff Competition

Although Gravity is doing well in its native country, it’s not outperforming Korean competitors like Nexon, PUBG Corporation, and Netmarble on the global gaming market. And that’s just the local competition – aside from the gaming giants already mentioned in this article, there are the likes of Microsoft, Ubisoft, Electronic Arts, Square Enix, and Namco to deal with. That’s not even to mention that none of Gravity’s games are currently available on any of the major consoles.

This leaves a lot of room for the competition to outplay Gravity at its own game, perhaps even introducing a similar IP using the same basic mythology. All of these are possibilities that leave analysts wondering where this company’s stock will peak.

Gravity Stock Forecast: The Bottom Line

Gravity is on its way up due to a renewed interest in its Ragnarok IP and a series of new games based in the world. As the coronavirus creates lockdowns around the globe, Gravity has an attentive audience ripe for the picking. It needs to gain a stronger foothold outside its Southeast Asia comfort zone to continue its growth trajectory though. Invest with caution.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.