Electronic sports, popularly known as esports, is one of the fastest-growing industries today. It was also a major winner of the coronavirus pandemic as many people spent most of their time at home. In fact, the VanEck Vectors Video Gaming and ESports ETF (ESPO) outperformed the S&P 500, as shown below. In this article, we’ll look at five of the best esports stocks to invest in today.
Video Games and ESports ETF vs. S&P 500
Nvidia is one of the biggest companies in the United States, with a market cap of more than $353 billion. The company is a well-known manufacturer of graphical processor units (GPUs) and other chips. The company is also a leading player in the eSports industry. For example, its GEFORCE graphics cards are known as the best performers in the industry.
Indeed, most gamers in the United States and around the world use the product for gaming. Additionally, Nvidia owns Shield TV and Shield TV Pro, products that help stream games.
Nvidia has been on a growth path that has seen it pass iconic chip manufacturers like Intel in market value. And recently, it announced that it would acquire UK’s Arm Holdings, the leading player in the Arm architecture.
There are several reasons why you should invest in Nvidia. First, its revenue has been on an uptrend, rising from more than $5 billion in 2016 to more than $14 billion in the past 12 months. Its net income has also grown from $614 million to $3.8 billion. Second, Nvidia has a strong market share in its industry. Third, it has a stake in other fast-growing industries like cloud computing, autonomous vehicles, and artificial intelligence.
Nvidia vs. S&P 500
Electronic Arts (EA)
Electronic Arts is one of the best-known brands in the video game industry. It owns some of the world’s most iconic gaming franchises like FIFA, Medal of Honor, NHL, Madden, and Apex Legends, among others. These are some of the hottest games in esports today.
EA has been on a strong growth path over the years. Its total market cap has jumped to more than $42 billion. Similarly, its annual revenue has increased from $4.3 billion in 2016 to more than $5.6 billion in the past 12 months. At the same time, the total number of players has increased to more than 300 million.
Like Microsoft, EA Sports has also changed its business model over the years. In the past, the company made most of its money by selling physical games. Today, most of its users pay a monthly or annual subscription to access its games.
EA Sports is a good esports stock because of its classic games like FIFA and Madden. Second, its subscription business model provides reliable and easy-to-forecast revenue. Third, EA Sports has a strong balance sheet made up of more than $6 billion in cash against less than $1 billion in debt.
EA Sports vs. S&P 500
Tencent Holdings (TCEHY)
Tencent Holdings is a company many Americans have never heard about. It is not even listed in the Nasdaq or the New York Stock Exchange (NYSE). Instead, it is listed in Hong Kong. Yet, Tencent is one of the biggest companies in the world. It has a market cap of more than $915 billion, making it the sixth-largest enterprise.
While many Americans have never heard about Tencent, many of them have used its services. For example, the company owns a large stake in Epic Games, the owner of Fortnite. It also owns Riot Games, the owner of League of Legends, and Ubisoft, the owner of Assassins.
In addition, the company owns WeChat, the Chinese version of WhatsApp that offers tons of mobile games. Also, it owns Tencent Sports, a leading internet sports company that has exclusive rights to popular leagues like Formula 1, NBA, and the French Open.
Tencent is an excellent company because of its strong position in China, where it dominates many industries. Through its venture firm arm, the company has invested in hundreds of companies that have a strong presence worldwide. For example, the company owns a 30% stake in Kuaishou, a TikTok rival that launched the biggest IPO in February this year.
As mentioned, Tencent is not listed in US exchanges. However, it is possible for Americans to invest in it through its American Depository Receipts (ADR) and ETFs.
Tencent vs. S&P 500
Unity Software (U)
Unity is a relatively new public company that many people have never heard of. But many have used its services indirectly. The company does not offer any games itself, but it helps power some of the world’s most popular games like Apex Legends, Arena of Valor, and Empire of Sin.
Indeed, more than 50% of the top 1,000 games in both Google Play and Apple App Store are made of the company’s products. These products help developers build interactive, real-time, and 3D games.
Unity has been on a strong growth path. It made more than $380 million in 2019, but in the past 12 months, this revenue has surged to more than $778 million. It launched its IPO in December 2020, and the stock’s surge has led its valuation to reach more than $33 billion. Unity is a good company because of the quality of its products.
Unity vs. S&P 500
Activision Blizzard (ATVI)
Activision Blizzard is one of the biggest global gaming companies, valued at more than $79 billion. The company has an annual revenue of more than $8 billion and annual profits of more than $2 billion. The firm owns some of the best-known franchises in gaming, including Call of Duty, Candy Crush, Diablo, and Spyro.
The company makes a good esports investment because of the strength of its franchises, strong balance sheet, and relatively low valuation.
There are many other esports companies that you should invest in. For example, you can invest in betting and fantasy sports companies like DraftKings and Penn National. Also, you can invest in hardware makers like Microsoft (XBox), Sony (PlayStation), and Nintendo. Further, you can invest in other game developers like Zynga and Take-Two Interactive.