5 Esports Stocks to Watch This Year

Esports exploded over the past 20 years to become a big part of the modern entertainment and technology industries. The global esports market revenue amounted to over $1.08 billion in 2021 and is forecast to grow to $1.6 billion by 2024.

Much of this revenue comes from sponsorships and advertising, which generated $641 million of that total. Over 474 million people viewed esports events over the past year, and that’s forecasted to grow to 577 million by 2024.

A market growing that fast is worth examining further and here are five esports stocks to watch which could take advantage of the boom.

Activision Blizzard Share Price May Be A Steal

Activision Blizzard, Inc. (NASDAQ:ATVI) beat earnings estimates by over 20 percent in both quarters of the first half of 2021. Its first quarter revenue of $2.07 billion handily trounced expectations of $1.78 billion, and analysts adjusted up in the second quarter, in which the company’s $1.92 billion tally still beat by nearly two percent.

The publisher is a major esports juggernaut, but it’s also facing a lot of legal backlashes over an ongoing pattern of harassment and discrimination. Both the state of California’s Department of Fair Employment and Housing (DEFH) and investors filed lawsuits against the beleaguered video game giant. 

In response, thousands of employees signed an open letter to management while hundreds staged a walkout. Blizzard’s studio president J. Allen Brack was replaced by Jen Oneal and Mike Ybarra.

Although earnings are beating analysts’ expectations, it’s not enough to balance out the bad press right now as investors try to determine the cost of the ongoing legal battles.

Of course, savvy investors know when to buy the dip, and Activision Blizzard could be a golden opportunity where the firm’s reputation hit translates to bargain share prices.

There are fundamental causes for concern, though. Blizzard-branded franchises like World of Warcraft and Overwatch decreased 18.8 percent in monthly active users (MAUs) year-over-year from 2020. 

However, Activision (known for Call of Duty) MAUs are up 1.6 percent and King (maker of Candy Crush) is down a modest 5.9 percent. Overall, the company still has 408 million MAUs heading into the back half of the year, and it pays a respectable annual dividend that has steadily increased over the years.

Electronic Arts Beating Analyst Guidance

Electronic Arts Inc. (NASDAQ:EA) stock struggled to grow past its initial pandemic pop in 2020, and its market capitalization is still flirting with 2018 highs. Still, it performed better than expected in its first quarter fiscal 2022 earnings with net bookings of $1.34 billion, beating guidance of $1.25 billion.

Although the EA brand is most connected with sports franchises like Madden and FIFA, it also has solid revenue streams with intellectual property gems like Mass Effect (subsidiary BioWare dropped its Legendary Edition in the quarter), Battlefield, Apex Legends, and Star Wars.

Over 140 million users played EA Sports online in the past year, and it doesn’t matter which version of football you prefer. Both American football and European futbol are engrained in their respective cultures and carry a rabid fanbase EA serves well.

The company has been on an acquisitive streak, buying studios like Glu (which had hits with Kim Kardashian among others) and Codemasters with a few others still pending. This could help push the EA share price down for another quarter and provide a real value for investors willing to wait for those acquisitions to bear fruit.

Moving forward, the company is continuing to focus on live services, which drove $1.05 billion in revenue in the last quarter. The company has $1.93 billion in operating cash flow and has a string of hits coming up over the next year, leading to financial guidance of $6.85 billion in net revenue for the 2022 fiscal year.

Allied Esports Entertainment Is A Live Event Play

Allied Esports Entertainment Inc (NASDAQ:AESE) is a different kind of esports company that’s dedicated to live interactive events. Most recently it teamed with NASCAR for an 18-wheel gaming truck touring the NASCAR Cup Series through the holiday season.

The mobile gaming arena will host driver-centric games like Rocket League and Mario Kart 8 Deluxe, along with racing simulators. It also sold non-core businesses including the World Poker Tour for $105 million to free up liquidity. 

It’s a solid realty play in the gaming space, as the company negotiates a lot of high-profile naming and co-branding rights, arena partners, and more. The Luxor’s Esports Arena on the Las Vegas Strip is a prominent example of this. It also deals in advertising and marketing rights for major events held at its events and venues. 

Still, it continues struggling to meet earnings expectations, which made its stock volatile since going public. CEO Frank NG resigned in July 2021 to be replaced by Claire Wu soon after completing the WPT sale. While valued under $100 million, it’s very possible investors could experience handsome returns over the next five years as event spending blows up.

Corsair Gaming Sells Shovels In A Gaming Goldrush

Corsair Gaming Inc (NASDAQ:CRSR) was founded in 1994 but didn’t go public until September 2020. It raised $119 million in the IPO. CRSR stock price was volatile in its first year on the Nasdaq market.

To get a big picture of the company, think of Corsair as the shovel in the gold rush as it manufactures high-performance gaming gear and accessories. 

Over the past few years, it’s become much more commonplace for gamers to beef up their home computer setups. Gaming is one of the most resource-intensive applications you can run on a device, and Corsair supplies both console and PC gaming rigs.

Not only that, but the company also provides tools for esports streaming and content creators, making it more accessible to audiences worldwide. This helped fuel the company’s 72 percent year-over-year revenue growth to $529 million in the first quarter of 2021. Second quarter results were just as impressive, with a 24.3 percent YoY increase to $472.9 million in net revenue.

The stock price appears to be suppressed by concerns over long-term debt of $270 million, compared to $138.6 million in cash and equivalents in its reserves. Cash flows from operations are decreasing, but a second pandemic wave combined with blockbuster game releases in the holiday season could carry Corsair share price higher.

Skillz Polarizes Bulls And Bears Alike

Skillz Inc (NYSE:SKLZ) is a San Francisco, California-based competition platform built into iOS and Android mobile games. This enables competition across the world and led to the company going public in a December 2020 merger with Flying Eagle Acquisition Corp’s SPAC. 

Since then, it attracted the ire of bears like Wolfpack Research and bulls like Cathie Wood of ARK Financial. Skillz holds a prominent position in both the ARK Next Generation Internet (ARKW) and ARK Innovation ETFs (ARKK).

This is despite the company reporting a net loss of $24 million in 2019 and a staggering $122 million in 2020. It’s likely to continue losing money, which is odd considering it retains 50 percent of revenue from all games it hosts. This is a much better margin than most app stores get, and the company is forging strategic partnerships (like the NFL) to continue expanding.

It is growing revenues though, with $89.5 million reported in the second quarter of 2021. That drew $85.1 million in profits with a 95 percent gross margin. Skillz also reported 47 percent year-over-year growth to $608.5 million in gross marketplace volume. Still, it reported a $79.6 million net loss for the quarter.

This has the potential help the $5 billion company grow back to all-time high stock prices near $50 in the next year.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.