A period in the sun during the pandemic, when alternative sources of entertainment were closed off to people, has been followed by a more difficult period for the video games industry.

However, there have been some recent signs of life in the sector, perhaps most notably with the reception for the launch of a new games console by Nintendo (7974:TYO).

Eight years after the original launch of the Switch in 2017, which saw Nintendo rake in sales of 2.7 million in the first month, Nintendo bettered this figure with 3.5 million global unit sales of Switch 2 in just the first four days after its release on 5 June showing that consumer appetite is still strong despite stretched budgets.

‘Nintendo Switch 2 is off to a strong start relative to the company’s plan to sell 15 million units in its first year,’ note analysts at investment bank Jefferies.

They add: ‘To support the launch, Nintendo worked closely with retail partners to ensure ample supply, though demand has still exceeded expectations. We note several major retailers showed the console out-of-stock online, per our checks.’

There have also been positive recent developments at two UK-listed games developers, Frontier Developments (FDEV:AIM) reporting a robust set of results on 11 June.

Analysts at Panmure Liberum comment: ‘Cash conversion has also been stronger than anticipated and the company has circa £42.5 million at the end of May, £10 million of this will be returned to shareholders through a new buyback programme (circa 9% of market cap).’

The company also revealed the October release date for the third instalment of the critically acclaimed JWE (Jurassic World Evolution) game following the Jurassic World: Rebirth movie set for release in early July. The momentum created by these developments sent the shares more than 50% higher over the last month.

Meanwhile Everplay (EVPL:AIM) (formerly known as Team 17) has, despite the swift departure of CEO Steve Bell, chalked up double-digit gains over the same period, as it reassured investors on its full-year outlook and announced a maiden dividend.

Katie Cousins, analyst at Shore Capital observes: ‘Whilst the backdrop remains somewhat challenging with continued consumer pressures, the underlying market trends are expected to be supported by the Nintendo Switch 2 console launch as well as a healthy outlook for game launches.

‘We believe that Everplay’s long-running reputation within the gaming industry and the diversity of the portfolio model, which reduces reliance on individual title performance, leaves it well positioned for further growth.’

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