The esports revolution is here.
Sports are a massive business. But the field of esports is where the growth is. Esports, or electronic sports, is simply competitive video gaming, and it’s growing by leaps and bounds every year. The market is expected to grow more than 40 percent to nearly $700 million in 2017, and viewership — both online and in-person — is surging. The IEM World Championship, a popular international tournament, attracted 173,000 people over two weekends, up 53 percent from last year. So, how can you invest in esports? Thankfully, there are a range of esports stocks to buy if you’re anxious to wager on the burgeoning area.
Take-Two Interactive Software (ticker: TTWO)
Video game publisher Take-Two Interactive, best known as the distributor of the Grand Theft Auto series, is also behind the NBA 2K franchise. In and of itself that’s unremarkable; what is remarkable is that the NBA has teamed with Take-Two to become the first major sports association to start its own esports league. The NBA 2K eLeague begins in 2018, and pro gamers will be selected through online tryouts. While TTWO sees the growing esports market mostly as a way to promote its products, it’s not a core driver of revenue for the company — yet.
Nvidia (NVDA)
Shares of semiconductor company Nvidia have been on a wild ride over the last year, as the chipmaker repeatedly beat earnings expectations. A big part of that was NVDA’s gaming division, which is the single-largest business segment in the company, accounting for more than 50 percent of sales. In the fiscal first quarter, NVDA announced the GeForce GTX 1080 Ti, which it claims is the fastest gaming GPU (graphics processing unit) in the world. NVDA stock is a way to invest in esports indirectly, which is how many hidden gems in the stock market are ultimately discovered.
Tencent Holdings (TCEHY)
Importantly, the growing field of esports is not simply a bunch of people playing sports video games. In fact, some of the most wildly popular esports games aren’t sports games at all. League of Legends for instance, a multiplayer online battle game, has been almost synonymous with the rise in professional gaming, and its user statistics are insane. In September 2016, Riot Games announced its most popular game had 100 million monthly players, up from 67 million in January 2014. Thankfully for TCEHY investors, Riot Games is a subsidiary of Tencent. Over the last three years, TCEHY shares have advanced 140 percent.
Electronic Arts (EA)
EA is one of the biggest names in the gaming world; even casual gamers will likely have played one of the company’s titles, considering its massive portfolio of name brand game franchises. Madden NFL, FIFA, Star Wars, The Sims, Need for Speed, Mass Effect and many other brands are only best-selling video games because EA develops and publishes them. But EA is eagerly investing in esports, too: In 2015 it created a new company division for building global esports competitions. According to the news release, one of the goals was “to develop live events and broadcasting that bring the spectacle of competition to millions of people around the world.”
Activision Blizzard (ATVI)
Another prominent video game publisher and developer, Activision Blizzard, is making some big bets on esports becoming huge. “Of the established video game software companies, ATVI has been the one most overtly investing in the area,” says Scott Kessler, an equity analyst at CFRA. The company is launching its own esports league around its popular first-person shooter game, “Overwatch,” and acquired esports event organizer Major League Gaming in 2016 for $46 million, moving it one step closer to its ambitious goal of forming the “ESPN of esports.” One simple way to invest in esports, then, is to just buy ATVI stock, though it’s not cheap nowadays.
NetEase (NTES)
This Chinese company offers popular massively multiplayer online role-playing games, mobile games and online communities for players to connect and interact with each other. The combination of the growing esports market and the expanding Chinese middle class has made NTES stock an enormously lucrative investment, with shares up 377 percent over the last five years. Revenue shot up 58 percent in 2016 and is expected to rise another 37 percent in 2017. Despite the impressive growth and lengthy rally, shares trade at just 21 times earnings.
Logitech (LOGI)
A less direct way to invest in esports is to buy the companies supplying the gear, not the software. Enter Logitech, which has wasted no time in capitalizing on the growing field and, in fact, already sponsors a number of world-class esports teams. Logitech’s gaming offerings run the gamut: Keyboards, headsets, mice, steering wheels and even backpacks are found in its product portfolio. When you can charge $70 for a mouse aimed at the pro gamer, that’s not a bad business. What’s even better is that LOGI’s gaming segment growth has been accelerating, growing 13 percent in fiscal 2015, 16 percent in 2016 and 27 percent in 2017.
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How to Invest in Esports: 7 Winning Stocks originally appeared on usnews.com
