eSports Stocks Are Gaining Ground; Time To Buy?
The coronavirus pandemic has created a spike in new demand for esports stocks. Activision Blizzard Inc (ATVI Stock Report) has reported strong earnings, overseeing net bookings jumping 21% year-over year. The stay-at-home orders have undoubtedly boosted user engagement and audience numbers. Looking ahead, the company is positioning itself for the next phase of growth in the esports market.
According to the NPD report for March 2020, consumers in the U.S have spent $1.597 billion on gaming. Being a prominent player in the esports industry, ATVI stock may have benefited significantly from this home entertainment rush.
- Auto Stocks To Watch: Ferrari’s Worth More Than GM & Ford; Still A Buy?
- Consumer Stocks To Watch In May 2020: Beyond Meat (BYND)
While Call of Duty is already a big name from the start, the stay-at-home order is only making it even more indispensable. The explosive growth we are seeing in gaming and esports makes Activision one of the best stocks to buy right now.
Activision Blizzard Beat Earnings Estimates, What Happened?
Activision Blizzard reported better than expected earnings after the market closed. The company reported $1.79 billion in revenue, above the company’s outlook of $1.64 billion. The better than expected results was due to the continued success of Call of Duty, and its free-to-play battle royale spinoff, Warzone.
The big surprise in this quarter is actually the effect of the Covid-19 pandemic on Blizzard. With people around the world confined to their homes, video games like World of Warcraft, Overwatch and Hearthstone have seen major increases in subscriptions and engagements.
“I think in the environment that we’re in today, where you have high levels of unemployment and economic uncertainty, having free games on phones is going to probably be a big way to grow the audience,” CEO Bobby Kotick
eSports Stocks to Watch: Activision Stock Continues To Thrive Under Strong Competition
When we are looking for the best stocks to buy in the video-gaming industry, one shall not take lightly the strong competition from other major players. Gaming giants like Electronic Arts (EA Stock Report), Take-Two Interactive Software (TTWO Stock Report) and Zynga Inc. (ZNGA Stock Report) may pose threats to the ATVI stock.
In esports, it is essential for companies to maintain active engagement by video game players. Gaming producers have to constantly create new Warzones and innovative features to continually draw the attention of players. No matter how fun or attractive the features are, without regularly introducing new updates, players can get bored easily. Of course, video game publishers know that.
Therefore, Activision has to keep upgrading games, enticing players to come back time after time. But that also means higher expenses, from the development of new features, enhancing gameplay experiences to marketing. This, in turn, will put the company’s operating profit under pressure.
eSports Opportunity To Give A Major Boost To Activision Stock?
So, what is Activision doing in esports? Up to date, the company’s major representatives in esports are Call of Duty League and Overwatch League. Apart from publishing games, the gaming giant has their own teams of players too.
[Read More] Car Rental Stocks Shaken By Covid-19 Impact
So, let’s say if the teams play competitively and have the potential to win major tournaments. In that case, there will be interested parties who will pay and take full ownership of the team, and run it like a business. The league will then allow both Activision and team owners to share profits as the league grows over time.
Activision Blizzard compares esports opportunities to major competitions in baseball, basketball and football. That’s because the main sources of revenue for both esports and traditional sports games are similar. The growth of the esports industry has allowed Activision Blizzard to make money from several revenue streams. The bigger chunks of esports revenue are coming from advertising and sponsorship. The team sales, media rights, merchandise and ticketing sales will continue to grow bigger as the industry becomes larger.
Media Rights Could Serve As A Catalyst For eSports Stocks Like Activision
Amazon (AMZN Stock Report), Facebook (FB Stock Report), and Alphabet (GOOG Stock Report) (GOOGL) all have their own game streaming sites. These tech giants have billions of dollars to invest to increase the variety of their content offerings. We expect they will aim to grow their respective audience base and make money over time.
This creates a major opportunity for big game makers like Activision. Even though many platforms are popping up, only a few companies have the rights to the content. This puts Activision in a great spot to look for the highest bidder, much like how traditional sports leagues are able to secure lucrative deals for their media rights.
Could Activision Stock Make You Rich?
Let’s take a moment to observe the Activision stock price history. Let’s say you are an early investor that has invested in ATVI stock in the 1990s. A $20,000 investment in Activision stock in the 1990s will make you a millionaire today. That’s more than 5,000% return over the past two decades. Given the strong historical returns, investors should perhaps not expect future performance to be significantly better.
Video gaming continues to demonstrate strong growth, further spurred by the current pandemic. Considering the fact that Activision owns top gaming franchises and reinvests its money where it matters, we think the stock can be particularly rewarding for investors looking to increase their exposure in this industry. Even if you are not a long term investor, ATVI stock remains a hot growth stock to watch right now.