Enthusiast Gaming Holdings Inc. (TSX:EGLX) has seen its revenue surge and has a NASDAQ listing on the horizon
Capital Ideas Media | January 19, 2021 | SmallCapPower: We last wrote about the eSports/eGaming space back in June 2020 when we featured the Evolve E-Gaming Index ETF (TSX:HERO). Its units have appreciated more than 43% since (as at January 18, 2021).
(Originally published on Capital Ideas Media on November 24, 2020)
We value this space highly as eSports/eGaming has become one of the fastest-growing subsectors of technology and entertainment, especially among the Millennial and Gen-Z cohorts. It represented just 1% of the global gaming market at nearly $700 million in 2017, yet the industry is expected to reach $1.65 billion by 2021, representing a 27.4% CAGR according to market research firm Newzoo.
And, with most people stuck at home to stop the spread of COVID-19, eSports growth is poised to proliferate.
That being said, we’ve been a spectator on Canadian small cap Enthusiast Gaming Holdings Inc. (TSX:EGLX) for some time but have been reluctant to become an active participant in covering this story, as its stock price seemed to have been stuck on the sidelines – that is, until recently.
[Editor’s Note: Shares of Enthusiast Gaming have soared more than 96% since Capital Ideas wrote about the company about two months ago.]
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Enthusiast Gaming, which says it is the largest gaming network in North America with more than 300 million gamers and 4.2 billion monthly page views, has seen its stock price surge more than 88% in November (to $2.87 per share currently).
This after the company reported better-than-expected Q3 financial results last week, in which its revenue for the period jumped 133% quarter over quarter to $16.3 million. The week before, it announced plans to list its shares on the NASDAQ, which analysts expect will happen early in the New Year.
One month before the end of the third-quarter 2020, Enthusiast Gaming completed what it called its “transformational” acquisition of Omnia Media. Omnia creates and distributes gaming-related video content on YouTube and represents and manages the underlying talent, this while generating US$59.9 million in revenue during Fiscal 2019.
Canaccord Genuity analyst Robert Young estimates Omnia Media will contribute approximately C$90 million in annual revenue for Enthusiast Gaming.
Paradigm Capital’s Corey Hamill, meanwhile, has a “Buy” rating on EGLX stock with a target price of $4.25 per share, saying the company is investing heavily in growth “and is less focused on earnings in the near term.”
Finally, B Riley Securities analyst Mike Crawford believes the company is poised for “double-digit top-line and gross margin growth.”
Enthusiast Gaming insiders also own more than 20% of the company, which is always a plus.
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