eSports Stocks: Next Big Opportunity for Investors

Gamers have fostered an exciting and competitive industry in the Digital Age, refining the eSports market

Below you will find six of the best eSports stocks that are followed by our analysts

SmallCapPower | January 21, 2019:  Commencing in 1972, the eSports industry experienced slow growth in popularity, however, the sector is now rapidly expanding on a global scale. eSports is defined as a multiplayer video game that is played competitively, by professional gamers, for spectators. Nonetheless, friends and family can collectively play and compete against each other and other players globally. Through mobile, console, and PC games, fans can enjoy the competition on a variety of platforms. According to Deloitte, with an estimated global audience of 600 million fans, the industry is projected to generate $1.5 billion in annual revenues by 2020. Due to this increase in popularity, traditional sports institutions are also embracing the exposure offered by this nascent industry. On October 2018, Nike announced that Jian “Uzi” Zihao, a League of Legends star, will make an appearance in an upcoming campaign with Lebron James. Other athletes are joining the bandwagon by launching their own companies or investing in eSports companies themselves. Furthermore, in August 2014, Amazon.com, Inc. (NASDAQ: AMZN) bought Twitch, a game-streaming service valued at $970 million. Surprising to many, this purchase was an investment to bolster Amazon Web Services (AWS), Amazon’s $7 billion on-demand cloud computing platform. With the increasing popularity of eSports, Twitch features major eSports tournaments, with the majority of users streaming video game content from home. The eSport industry appears to be occurring on a global scale, simultaneously capturing the attention of millennials and the older generation.

1. Electronic Arts Inc. (NASDAQ:EA)- $122.62

Electronic Arts (EA) is a digital interactive entertainment company that develops, markets, and distributes games and services for game consoles, personal computers, cellular devices, and tablets. With a mission to create unique and innovative games, EA focuses on developing and publishing its own gaming software as well as licensing games from other companies. Through retail and digital distribution channels, the Company has over 300 million registered players around the world. Known for its critically-acclaimed brands such as The Sims™, FIFA, and EA SPORTS™, the Company reported net revenue of $5.15 billion in 2018. On July 2018, its stock price slid, falling by nearly 10% after announcing the Company will delay the release of Battlefield V by a month. As a result, management adjusted its full-year guidance to reflect the lower sales.

  • Market Cap: $37.05 Billion
  • Revenue: $1,286.0 Million (3 months ended Sept 30,2018)
  • 1-Month Total Return: +18.1%
  • 1-Year Total Return: -21.6%

2. Take-Two Interactive Software (NASDAQ:TTWO)- $143.48

Take-Two Interactive Software engages in the developing, publishing, and marketing of interactive entertainment solutions. The Company offers products primarily through Rockstar Games and 2K, its wholly-owned labels. It develops and publishes action and adventure products through names such as Grand Theft Auto, where it develops sequels and offers episodes for downloading. With great genre diversity, the games are user-friendly and are compatible with a variety of gaming consoles, such as Sony Play Station 3 and 4, Microsoft Xbox 360 and Xbox One, personal computers, smartphones, and tablets. Through physical and digital distribution channels, the Company can effectively reach its audience worldwide. TTWO reported strong earnings for its fiscal second quarter ended September 30, 2018, stating an 11% net revenue growth to $492.7 million, compared to last year’s second fiscal quarter of $443.6 million. The Company said it will announce its fiscal third-quarter earnings ended December 31, 2018, before market open on February 6, 2019.

  • Market Cap: $16.33 Billion
  • Revenue: $443.6 Million (3 months ended Sept 30, 2018)
  • 1-Month Total Return: +5.1%
  • 1-Year Total Return: -8.6%

3. Activision Blizzard, Inc. (NASDAQ:ATVI) – $64.48

Activision Blizzard works with the developing and distributing of content and services on personal computers, video game consoles, and mobile devices. Operating through the following segments: Activision Publishing, Inc., Blizzard Entertainment, Inc., and King Digital Entertainment, the Company develops, publishes, and markets software products and entertainment content. Through Battle.net, its propriety online gaming platform, the Company facilitates digital distribution, creation of user content, and online social connectivity. The Company also provides logistics, warehousing, and sales distribution services to other interactive entertainment vendors, as well as creating original film and television content. Activision Blizzard reached 354 million monthly active users in its third quarter. The Company reported better-than-expected results, with net revenue of $1.51 billion for the quarter ended September 30, 2018. On January 10, Blizzard Entertainment and NetEase (NASDAQ:NTES) announced an extension to their partnership, where they worked on games such as World of Warcraft® StarCraft® series, The Diablo Series®, which will be extended until January 2023.

  • Market Cap: $49.20 Billion
  • Revenue: $1.51 Billion (3 months ended Sept 30, 2018)
  • 1-Month Total Return: 5.0%
  • 1-Year Total Return: -31.8%

4. FANDOM SPORTS Media Corp. (CSE:FDM)- $0.08

FANDOM SPORTS Media is an entertainment company that curates and creates fan-focused content. Its main product, FANDOM SPORTS App, is a mobile application for sports news, enabling viewers to participate in unfiltered sports talk. The app allows fans to express their passions for sports, pick fights with other players, and earn rewards. Operating in Canada and Finland, the Company is increasing in popularity as the eSport market expands. On December 6, 2018, FANDOM SPORTS became a member of the Consumer Technology Association (CTA), an association that acts as an advocate for entrepreneurs looking to shape the future of the consumer technology industry. On January 10, 2019, the Company launched its platform at the Consumer Electronics Show (CES), inviting a select few industry professionals in sports, esports, technology, and media.

  • Market Cap: $11.4 Million
  • Revenue: 0
  • 1-Month Total Return: -20.0%
  • 1-Year Total Return: -73.3%

5. Enthusiast Gaming Holdings Inc. (TSXV:EGLX) – $0.88

Enthusiast Gaming Holdings is a digital media company, which engages in the developing and operating of online video gaming communities for users worldwide. With a platform of over 80 gaming content websites, and over 75 million monthly active users, the Company also owns the largest gaming exposition in Canada with an attendance exceeding 30,000 visitors. The Company has experienced significant acquisitive growth, resulting in a tremendous increase in monthly visitors from two million in 2015 to 75 million currently. The Company reported 2018 revenue of $2.8 million, a significant increase from $0.66 million in 2017. On January 7, the Company announced its definitive agreement with The Sims Resource (TSR), acquiring 100% of the assets. Valued at US$20 million, the acquisition is set to be completed on February 15, 2019.

  • Market Cap: $39.3 Million
  • Revenue: $2.8 Million (3 months ended September 30, 2018)
  • 1-Month Total Return: +14.3%
  • 1-Year Total Return: -17.8%

6. ePlay Digital Inc. (CSE:EPY) – $0.07

ePlay Digital is a mobile game creator, which engages in developing and operating broadcast and live video technologies, specializing in sports and entertainment augmented reality (AR) titles in Canada. The Company offers interactive white label videos and marketing platforms. The Company’s solutions comprise of TV, Internet, social media, etc., to enable multi-platform locations and campaigns for a variety of brands. The Company’s focus is on building the PokerVision Network, a multi-platform broadcasting network that delivers content to consumers through both digital and traditional media, as well as other broadcasting platforms. Based on management’s revenue guidance, the Company is expecting US$42 million in revenue by 2021, generated through the sales of consumer products and software licencing fees. Looking to gain exposure for Big Shot AR, the first augmented reality sports mobile game on the market, ePlay CEO announced at the 2019 Consumer Electronics Show (CES) that the game will add a new AR version. Striving for continuous improvement, ePlay Digital announced the rebranding of its award-winning subsidiary Mobovivo on October 2018, to Mobovivo ESPORTS, looking to drive mobile eSports engagement and streaming.

  • Market Cap: $3.7 Million
  • Revenue: $0.09 Million (3 months ended September 30, 2018)
  • 1-Month Total Return: -7.1%
  • 1-Year Total Return: -50.0%

Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.

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