Here’s how to invest in esports.
Video gaming has evolved far beyond a niche group of gamers sitting at home playing alone on their consoles. In the past several years, online gaming, streaming and esports have become part of a booming business. Global esports industry value should grow 21.9% annually over the next eight years and reach $12.4 billion by 2030, according to Grand View Research, a consulting firm. Media rights, ticket sales, sponsorship and advertising deals account for the majority of esports revenue, but the entire gaming industry benefits from its popularity. Here are seven top analyst-recommended stocks to buy with exposure to the esports arena.
Nvidia Corp. (ticker: NVDA)
Nvidia’s high-end GeForce graphics cards provide the high-performance experience demanded by esports gaming professionals. CFRA Research analyst Angelo Zino says Nvidia’s data center business has positive momentum thanks in part to the company’s Hopper-based graphics processing unit, which uses process technology from Taiwan Semiconductor Manufacturing Co. Ltd. (TSM). In addition, Zino says Nvidia’s Grace central processing units could be a bullish catalyst in 2023, and he anticipates a rebound in auto industry chip demand in coming quarters. CFRA has a “buy” rating and $200 price target for NVDA stock, which closed at $118.88 on Oct. 17.
Tencent Holdings Ltd. (TCEHY)
Tencent publishes League of Legends in China and operates the associated esports Pro League and World Championship. Tencent opted to shut down its game streaming service Penguin Esports in April amid a broad crackdown on technology companies in China. However, Tencent still owns major stakes in Huya Inc. (HUYA) and DouYu International Holdings Ltd. (DOYU), which together account for more than 70% of China’s video game streaming market. Morningstar analyst Ivan Su says China issued 73 new game licenses in September, an encouraging trend for gaming companies like Tencent. Morningstar has a “buy” rating and $94 fair value estimate for TCEHY stock, which closed at $31.93 on Oct. 17.
Microsoft Corp. (MSFT)
Entering 2022, Microsoft already had a large presence in the gaming world with its Xbox console and Game Pass subscription service. In January, Microsoft announced a planned $68.7 billion buyout of Activision Blizzard Inc. (ATVI), the world’s largest independent video game publisher. Activision Blizzard launched the professional Overwatch League in 2018 and the Call of Duty League in 2020. Bank of America analyst Brad Sills says Microsoft’s Azure cloud services and Office 365 professional software businesses will be the key growth drivers for Microsoft in the long term. Bank of America has a “buy” rating and $345 price target for MSFT stock, which closed at $237.53 on Oct. 17.
Sea Ltd. (SE)
Sea is the parent company of Garena, an online and mobile game developer headquartered in Singapore. Garena developed Free Fire, the most downloaded mobile game in the world in 2019, 2020 and 2021. Garena is also a leading esports organizer that hosts some of the most viewed esports competitions in the world. Bank of America analyst Sachin Salgaonkar is bullish on Free Fire’s user engagement and monetization trajectory and says Sea’s Shopee e-commerce platform is well positioned for growth in the key Southeast Asia market. Bank of America has a “buy” rating and $105 price target for SE stock, which closed at $52.93 on Oct. 17.
Take-Two Interactive Software Inc. (TTWO)
Take-Two Interactive Software is a video game publisher and owner of popular franchises including Grand Theft Auto, Red Dead Redemption and Borderlands. One of the company’s most successful esports ventures has been its 2017 partnership with the National Basketball Association to create the NBA 2K League. More than 1 million unique viewers watched the 2022 NBA 2K League 5v5 Finals on Twitch. CFRA analyst John Freeman says Take-Two has a historically attractive valuation and will benefit from long-term growth trends in video game engagement and emerging market disposable income. CFRA has a “buy” rating and $148 price target for TTWO stock, which closed at $117.89 on Oct. 17.
Electronic Arts Inc. (EA)
EA has hosted major esports tournaments for its FIFA, Madden NFL and Apex Legends franchises. In August, EA extended its partnership with the National Football League and reported Madden NFL Esports viewership was up 400% year over year last season. Morningstar analyst Neil Macker says EA is expanding its player reach via Apex Legends Mobile, and he anticipates that the company will continue to benefit from new generations of consoles, growth in mobile gaming and the extension of the monetization window of its games beyond the initial point of sale. CFRA has a “buy” rating and $142 fair value estimate for EA stock, which closed at $121.03 on Oct. 17.
Roblox Corp. (RBLX)
Roblox is a company with a platform that allows users to make their own games, interact virtually and play in real time over the internet. These digital worlds are collectively called the metaverse, and the metaverse could ultimately take esports to the next level in the long term. For now, Bank of America analyst Omar Dessouky says Roblox’s stock price will likely continue to be dictated primarily by monthly bookings. However, Dessouky says Roblox has a long window of annual revenue growth in the mid-20% range. Bank of America has a “buy” rating and $54 price target for RBLX stock, which closed at $42.61 on Oct. 17.
7 best esports stocks to buy:
— Nvidia Corp. (NVDA)
— Tencent Holdings Ltd. (TCEHY)
— Microsoft Corp. (MSFT)
— Sea Ltd. (SE)
— Take-Two Interactive Software Inc. (TTWO)
— Electronic Arts Inc. (EA)
— Roblox Corp. (RBLX)
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7 Best Esports Stocks to Buy originally appeared on usnews.com
Update 10/18/22: This story was previously published at an earlier date and has been updated with new information.
