Which stocks will profit from esports
Esports and gaming in general are two of the fastest growing industries all over the world. Livestreaming, thanks in large part to gaming, is also seeing rapid adoption from all consumer groups – mainstream and niche consumers alike.
With all of this money being poured into the gaming and livestreaming industries, who are the biggest beneficiaries?
To answer this question, let's analyze how money flows through the livestreaming industry.
Money is added into the game streaming industry mostly by consumers and corporations (sponsorships).
All of this money goes directly to the streamer, alluding to a more decentralized ecosystem for creators; effectively, less money goes to corporations compared to past entertainment industries.
So, if people, and not corporations are the biggest beneficiaries of the shift towards livestreaming – do any stocks pose to benefit?
The answer is YES – but the stocks that benefit will not necessarily be the big corporations, but those who help the players.
To this tune, I have put together a list of some esports stocks to look out for. Some of these stocks have been up big over the last year – I expect them to continue to grow.
Before we dive into specific stocks, we can paint a general picture of what the rise in livestreaming adoption means for the stock market.
First and foremost, let’s backtrack to what I mentioned about the industry being more decentralized than past industries. This connects incredibly well to the rise in adoption of crypto – this relationship is not a coincidence.
So, I think stocks that utilize, mine, or manage crypto assets will see success due to the rise in livestreaming and the developing ecosystem.
Another type of company that poses to benefit are those who offer growth opportunities directly to gamers.
Some of these companies will specialize in digital design, others in connecting gaming to other industries, such as advertising, and apparel.
Game publishers also pose to benefit – not a surprise.
Esports streaming stocks
So, you want to make money off of esports streaming on the stock market. Luckily, I have been doing the same thing for the last three years, these are the best stocks to own if you are looking to profit off of esports streaming.
Turtle Beach Corporation
Turtle Beach Corporation (HEAR) – Turtle Beach has been around since the early days of Call of Duty and the rise of multiplayer games. The company specializes in gaming headsets, but has recently ventured further into the esports peripheral space with the acquisition of Roccat, a european company focusing on the production of high-quality keyboards and mice.
Turtle Beach owns approximately 50% of the market share of gaming headsets and offers products at all price ranges: $15-$300. This benefited the company heavily during lockdowns, as the pandemic hit poorer regions more than affluent ones.
Given Turtle Beach’s affordable options, the company saw an insane level of growth during the last year. The stock sat at about $5 last March, and was trading at $35 a few weeks ago. The company recently reported earnings for the quarter, announcing for the first time that they controlled more than half of the market share in the gaming headset market.
They recently acquired another company, Neat Microphones, in an attempt to build headsets for more purposes than simply gaming.
The company also has an outstanding balance sheet. 3 years ago Turtle Beach boasted more than $80M in debt. Today, the company has over $40M in cash reserves and absolutely no debt on their balance sheet! Wow!!
Nvidia Corporation (NVDA) – Nvidia is another great gaming company that saw high levels of growth during the pandemic. Nvidia focuses on the production of high-level graphics cards, however has a long product lineup and affordable options for all types of consumers.
Graphics cards allow your computer to handle higher quality games and to run them more smoothly. This is a big deal if you are streaming a graphics-intensive game, such as Warzone, Apex Legends, or Escape From Tarkov.
Nvidia recently released their 3000 line of GPUs, a major upgrade from the 2000 series which was released back in September, 2018. The 2020 release of the 3000 line was a monumental success. Not only did the GPUs sell out immediately, the release became mainstream news due to aggressive nature of scalpers, who attempted to sell 3080 and 3090 units (the top-line GPUs in the 3000 series) for more than four times their original price.
The 3090 and 3080 lines sold out again in only 30 seconds after the first restock, and continue to be some of the most demanded products in the entire gaming market. The cards are still sold out today.
While the insane demand for Nvidia products is a great sign for the company, their inability to meet this demand is not. Nvidia will hopefully solve this problem in the near future, but the core product of the company is too valuable to not invest in.
In March 2020, NVDA hit a low of $202, and recently hit a high of $613 on February 16th, 2021. Today the stock is trading at about $500. I believe Nvidia is a great stock to own if you want to invest in the future of gaming and esports streaming.
Amazon (AMZN) – Everyone knows about Amazon, but not everyone knows that Amazon owns Twitch, the largest of the esports streaming sites.
Twitch has achieved a level of mainstream appeal that has been unmatched by any of their competitors. Essentially, Twitch is to the live-streaming industry as Uber is to the food delivery industry. When people want to go live, the first platform they think of is Twitch.
This is evidenced by many non-gamers who have begun live streaming on Twitch in recent months. Examples of popular non-gamers who have hosted live streams on Twitch are:
While Twitch itself is a great reason to invest in Amazon, there are also others. Amazon has recently invested into gaming by building their own engine called Amazon Lumberyard. They have released one title built on Lumberyard and plan to release many more in the near future.
They released their first in-house title in 2020 called Crucible. Crucible was a free-to-play multiplayer game built in a mythological universe. The game pitted you in a forest and tasked you with surviving both AI monsters and other opponents trying to take you out.
Unfortunately for Amazon, the game was an absolute dud and has since stopped being supported by the company. They released a statement on their website saying that Crucible’s public server will be shutting down in November 2020 and the development team has since shifted their efforts to New World, Amazon Studios' next big project.
Amazon is always a solid stock to buy and their acquisition of Twitch has opened a ton of growth opportunities in gaming for the near future.
Alphabet, the parent company of Google, has also made big news in the gaming industry in recent years with their release of Stadia, a service that allows users to stream games similarly to how one streams music on Spotify.
This might seem puzzling to you, as game files can be hundreds of gigabytes while individual songs barely take up any space. This is true, and Stadia requires a very strong internet connection in order to play without lag – think about 50 mbps at a minimum.
Stadia is a great product and a very innovative one, but users have given the service mixed reviews since it’s release in 2018.
Many of their negative reviews focus on both the price of the service as well as the fact that you need a high-level internet connection in order to be able to play.
The problem with the price of Stadia, is that it actually ends up being more expensive than just buying the game on your PC. To use Stadia, you have to pay a monthly fee of $60. On top of this, you have to pay full price for games.
To make matters worse, users were promised that Stadia would receive many more games over the products first year than were actually delivered.
While gaming over the cloud certainly has it’s benefits, Stadia appears to have taken the wrong approach to cloud gaming. I do not expect Stadia to fail, in fact, I am actually incredibly bullish on cloud gaming for the future.
I think Stadia will grow slowly over time and will receive more adoption from game developers as more users join the service. Cloud gaming allows users to play whatever games they want on whatever platform they choose (with Stadia all graphics are rendered in the cloud), and this value proposition is simply unmatched in gaming.
Game publishers stocks
While I mentioned the livestreaming industry benefits individuals more than corporations – game publishers are the exception. Many of the major publishers own game franchises that have stood the test of time – Call of Duty, World of Warcraft, Fortnite are great examples.
Activision (ATVI) – Activision is arguably the most popular and biggest video game publisher in the United States. They are the parent company of many popular esports games such as World of Warcraft, Call of Duty, Starcraft 2, and Overwatch.
Of the major public publishers (EA and Take-Two as well) Activision has taken the biggest strides into the esports industry, having started international competitive leagues for both Call of Duty and Overwatch.
These leagues have grown in popularity over the years but have also raised concerns regarding the ability to run leagues around a single game title. Overwatch took the world by storm in 2016 as a fun and fresh competitive shooter but has fallen off significantly as more competitive shooter titles have entered the market.
Since its inaugural season, the OWL has seen steadily decreasing engagement and many investors and influencers in the gaming community wonder about the future of the league, given the defaulting consumer interest in the title.
In March 2020, the OWL and Overwatch betting took a huge hit when reigning MVP “Sinatraa” left his team in the OWL to play Valorant, a newly released title from Riot Games which shares the same emphasis on characters and their abilities as Overwatch.
While the future of the OWL is uncertain, the CDL (Call of Duty League) benefits from being played on a new title each year. After an inaugural season on the 2019 title Modern Warfare, the CDL is back this year with the 2020 CoD title: Black Ops Cold War.
The CDL has seen much more success than the OWL and continues to grow in it’s second season. The opening weekend of the 2021 CDL season was the most watched weekend in the two year history of the CDL besides the 2020 Championship. This is a great sign for the CDL and Call of Duty betting moving forward.
Electronic Arts (EA) – EA is another video game publisher giant and is one of two other companies who pose a threat to Activision as the publisher with the highest market cap on the Nasdaq.
EA specializes in sports games, such as the Madden, Fifa, and NHL series of games. Their portfolio also includes games in other genres such as Apex Legends (which belongs to ever-growing battle royale games genre) Battlefield Franchise (FPS shooter) and the Sims Franchise (simulation esports games)
EA has also invested into esports through their sports titles, specifically Madden and Fifa. In 2017 they announced the NBA2K League, with seventeen NBA franchises adopting an e-athlete to represent their team in the competitive NBA2K circuit.
Since 2017 the league has grown and now features 23 teams. One of the biggest franchises involved in paving the path for the NBA2K league was the Dallas Mavericks and their esports division entitled “mavs.gg.”
The Mavs and their Head of Gaming, Roger Caneda, built a 30,000 square foot complex in Dallas to house their gaming and content efforts. This initiative sparked a ton of interest in the NBA2K league and led to many other franchises joining the league the following year.
In addition to the NBA2K League, EA has also taken a similar approach to establishing an esports community with FIFA, leading to an increase in FIFA betting. In early 2020, Major League Soccer and Electronic Arts announced the eMLS league, with all 27 teams in the league signing an e-athlete to represent their squad.
In relation to esports betting, many sports titles are often bet on as simulations, where computers play against one another.
Take-Two Interactive (TTWO) – Take-Two is another great gaming publisher and is best known for their open-world and exploration titles: Grand Theft Auto and Red Dead Redemption. Both Franchises have proven to be engaging experiences and have seen sequels that have delivered even better experiences than the original.
Grand Theft Auto V, the most recent release in the GTA franchise, has sold over 130 million copies since the game’s initial release in 2013. The game also saw a heavy increase in Twitch viewership in 2020, as new “roleplay” servers were added, allowing gamers to enter servers are a particular person – maybe a restaurant server, an auto-mechanic, or any other common occupation which exists on the server.
From here, gamers simply live out the lives of their characters, carrying out the seemingly mundane tasks of their character. What makes the roleplay servers interesting is the fact that players can talk to one another if they are within a certain distance. This feature is called proximity chat, and opens the opportunity for lots of fun dialogue between streamers and players alike.
Take-Two’s stock price is heavily tied to the Grand Theft Auto franchise. If rumors begin swirling of a Grand Theft Auto 6 release, the stock will undoubtedly be up in the following sessions. I would get in now, as the stock is down more than $30 from a yearly high of $200 in recent months.
Small Cap Stocks (Emerging Companies)
Esports Entertainment Group (GMBL)
Esports Entertainment Group is a relatively new company in the entertainment/gaming industry and focuses on the intersection of gaming and betting.
The company recently made headlines by becoming the official esports tournament hosting platform of the New England Patriots and acquiring LuckyDino Casino.
Paul Dwalibi, a well-known esports investor and host of the Business of Esports podcast recently invested into the venture, citing the company's good intentions and publicly available balance sheet as reasons for the investment.
GMBL is up a ton since I discovered the stock in March at $3.50. It trades at about $12 today. Still has room to go up, but this is a risky investment – lots of competition.
Upwork is a more creative and outside-the-box play than the ones above (at least in reference to streaming), but I believe it may be the best stock of them all. Upwork serves the remote jobs market, helping to connect freelancers to the clients that wish to use their services.
All hired freelancers on Upwork are remote, alluding to the fact that Upwork is likely to benefit from the rise in gaming and esports streaming in the past few years.
Given that gaming is an entirely digital industry, there is less of a benefit to having employees meet face-to-face rather than via Zoom. On Upwork, you can find all of the talent needed to help with your gaming-related needs.
You can find developers who can work in any language as well as artists and creative thinkers to bolster your content.
Upwork also stands to benefit from the pandemic itself, which spurned the role of Zoom in modern-day business and as well as helping to push gaming into the mainstream.
Upwork sat at about $5 in March and peaked at above $60 in past weeks. The stock is cheap at $48 today (4/28/21) and I see some serious upside in this stock as more people and businesses move to remote work and into the gaming industry.
Foreign Esports Stocks
I do not know too much about foreign markets, but there are a few foreign public companies that pose to profit off of the rising in esports streaming.
Tencent is undeniably the biggest company in the gaming industry, having either partial or complete ownership of almost every successful company in the space.
Here is a list of the major gaming companies Tencent has invested in as well as their current stake in the company:
- Riot Games – 100%
- Epic Games – 40%
- Activision – 5%
- SuperCell games – 84.3%
- Discord – Unknown %
All of the Chinese streaming sites mentioned in the section above are also public companies, traded under the following tickers:
Recently, these two esports streaming platforms announced their intent to merge, effectively creating a single live streaming giant in China, owning 85% or more of the market.
Yet another one of the esports live streaming platforms in China. I would stay away from this one due to the Huya/Douyu merger announcement.
Lets Talk ETFS – Less Risk and Sector-Focused
ETFs stand for Exchange Traded Fund and allows you to invest in multiple companies, all of which are partially represented by the ETF. This means that an ETF is made up of many esports stocks, with each stock representing a few percent of the total fund.
Many ETFs are built to follow specific industries, such as energy, electric vehicles and even esports streaming.
Roundhill Investments, an investment firm focusing on gaming, sports betting, and cryptocurrencies, offers two ETFs that have and will continue to benefit from gaming and live streaming. These indexes are the NERD Esport sIndex and the SUBZ Live Streaming Index.
NERD Esports Index – This ETF follows the gaming industry with a focus on esports. Here is Roundhill’s explanation of the NERD ETF as well as the five biggest holdings:
“The Roundhill BITKRAFT Esports Index is the first rules-based index designed to track the performance of the growing market of electronic sports, or “esports”. The Index consists of a tiered weight portfolio of globally-listed companies who are actively involved in the competitive video gaming industry. This classification includes, but is not limited to: video game publishers, streaming network operators, video game tournament and league operators/owners, competitive team owners, and hardware companies.”
As mentioned above, ETFs feature “holdings” which are really just other stocks. ETFs have many holdings, sometimes as many as 500. NERD features about 35 companies and these are the ones that make up the biggest percentage of the fund.
Huya Inc. (HUYA) – 6.17%
Douyu Intl (DOYU) – 5.98%
Tencent (TCHEY) – 5.81%
Activision (ATVI) – 5.09%
Modern Times Group (MTGB) – 4.65%
The most recent of the Roundhill Indexes, the SUBZ index tracks the live streaming industry and the companies involved. The index is not specific to solely gaming, as it follows other genres in live streaming, such as television and music. Gaming is of course a large part of the live streaming industry and is well-represented in their fund.
Here is what Roundhill had to say about the SUBZ ETF:
“The fund consists of companies from across the globe who are actively involved in the business of streaming. This classification includes (i) companies that operate direct-to-consumer streaming services including video, audio, live streaming; and (ii) companies that create infrastructure or technology necessary to facilitate streaming.”
Top Five Holdings by Percentage
- Tencent Music (TME) – 5.82%
- Netflix Inc. (NFLX) – 5.79%
- J-Stream (4308 JP) – 5.12%
- Spotify Technology (SPOT) – 4.96%
- Roku Inc. (Roku) – 4.75%
Esports Stocks FAQ:
What happens to stocks if esports are in the olympics?
If esports are in the Olympics, esports stocks will likely benefit, as gaming will be featured as a mainstream sport for the first time.
Which stocks will profit from esports?
Gaming, cryptocurrency, and stocks that focus on the shift towards digitalization pose to benefit the most from esports.
What esports stocks I should buy?
My top 3 esports stocks to buy are Turtle Beach (HEAR), Activision (ATVI), Nvidia (NVDA), and Take-Two (TTWO). I cover all of these stocks in this article.