In an article for the Motley Fool, Keith Noonan breaks down 3 stocks in the video game industry that are strong buys in February, including one that we recommended back in November:

Activision Blizzard 

Engagement for video games trounces pretty much every other form of media. The interactive nature of games means they captivate a player’s attention, and that’s a big advantage in a world where competition for consumer eyeballs has never been more fierce.

When it comes to shaping the world of interactive entertainment, few companies have played a bigger role than Activision Blizzard . The company is an industry leader that looks poised to continue delivering wins and rewarding long-term shareholders.

The company’s core franchises include genre-defining properties such as Call of Duty, World of Warcraft, and Candy Crush Saga. The company also has perhaps the industry’s single best track record of launching and sustaining new hit properties. It combines a powerful force of development studios and marketing expertise, and it will likely continue to play a leading role in the shaping the industry’s growth.

Activision Blizzard also pays a dividend, and the company has been building an impressive payout growth streak despite the stock’s yield looking relatively small. Shares yield roughly 0.4% as of this writing, while the payout has grown over 170% since the company first initiated its dividend in 2010. Its ability to raise its payout each year is a testament to the company’s consistent profitability, and it looks like Activision Blizzard still has a long runway for dividend and share price growth.

Ubisoft 

It’s been an interesting few years for Ubisoft . The France-based video game publisher missed opportunities with some key releases in 2018 and 2019, but the business has battled back from rough patches and shown it has staying power.

Solid execution over the last year and a variety of tailwinds stemming from the coronavirus pandemic have recently prompted solid performance for Ubisoft stock. The company’s share price has climbed roughly 32% over the last year, and the publisher now has a market capitalization of $12.4 billion.

For a company with proven franchises and development studios, that valuation looks too conservative, and there’s a good chance that Ubisoft stock will surge at some point over the next few years. The company has proven that franchises, including Assassin’s Creed, Rainbow Six, and Ghost Recon have longevity, and it has the resources to deliver new hit series and pursue growth opportunities in mobile, esports, and augmented reality.

The game maker is valued at approximately four times this year’s expected sales and 29 times earnings — levels that look quite reasonable in the context of the company’s solid foundation and growth potential.

Glu Mobile 

Glu Mobile  is a maker of free-to-play mobile games that are geared toward casual players. The small-cap company is worth just $1.5 billion, and it trades at less than three times 2021 sales estimates and 17 times forward earnings. With its own underappreciated individual strengths and the overall video game industry likely to enjoy sustained growth, Glu could blow past its current valuation even if it doesn’t manage to hit any home runs with new releases in the near future.

Thanks to the strength of core franchises, including Design Home, Covet Fashion, and MLB Tap Sports Baseball, management anticipates that bookings will grow between 8% and 10% this year without any contribution from new releases. The company also has four new games set to release in 2021, but the market has underestimated the sturdiness of Glu’s existing lineup. That creates an opportunity for investors.

In addition to new releases and content updates for its existing titles, Glu will likely be making some acquisitions moves in the near future. The company closed out the third quarter with $318 million in cash against zero debt, and management has indicated that it’s in the process of identifying outside development studios that can help push the company’s growth to the next level.

With shares trading at affordable multiples and diverse avenues for the company to outperform expectations, Glu Mobile looks like another buy in the gaming industry.

Source: https://www.fool.com/investing/2021/02/04/3-top-video-game-stocks-to-buy-in-february/

Nerd Street Gamers CEO John Fazio commented on the deal in an article with Esports Insider: “Nerd Street being added to Founders Fund’s portfolio of industry-pioneering organisations is one of our greatest honours to date. Within minutes of meeting Brian, it was clear that he was profoundly aligned with our vision and mission. Backing us during the uncertainty of a global pandemic is a testament to Brian’s bold foresight and an incredible validation for our entire team.”

The pandemic has caused Nerd Street to close their Localhost facilities, but they quickly adapted to a digital platform through online tournaments, coaching, camps, and Nerd Street+, their subscription service. Nerd Street hosts events for a number of games, but have made the most noise with their involvement in Valorant tournaments, specifically being selected to operate the first stage of the Valorant Champions Tour, and their recently completed Valorant Winter Championship Tournament which saw Luminosity Gaming come out on top.

Thanks to its successful shift to a digital platform throughout the pandemic and facilities closures, Nerd Street was able to increase its membership by over 200% since 2019. And in the last year their Twitch channel, which live-broadcasts its tournaments, saw a 4,000% increase in minutes watched and their followers go from 13,000 to over 120,000.

Venture Beat caught up with Fazio regarding the closing of its Localhost facilities and their shift towards a digital platform: “One major way we’re addressing the current climate is through our new digital subscription service. Because we’ve had to shut down our physical venues during the pandemic, we are truly seeing now more than ever the severe access gap in technology for young people across the country to participate in remote learning, let alone play games, because of a lack of home internet access. To address this, Nerd Street Gamers recently announced a subscription service that ensures that students and gamers will have the affordable access to the technology necessary to participate in the awesome social opportunities that esports can provide despite the pandemic (and beyond it).”

With the overall digital shift of gaming and esports, Nerd Street Gamers is in a prime position to capitalize on the opportunity and Founders Fund clearly believes it. With this new funding, Nerd Street should be more than capable of continuing to grow their digital platform and consumer base, and once they can reopen their Localhost facilities they will have two primary sources of growth and revenue to build upon.

1. Mobile games is already accounting for almost 50% of the global games market, it was only a matter of time before that transferred over into esports. In an area of gaming that has historically been dominated by PC games such as CS:GO and Dota 2, mobile esports like PUBG Mobile and Garena Free Fire have entered the top five most overall hours watched esports titles, even exceeding the likes of the big name PC games mentioned in peak viewer counts.
2. Esports organizations are going to continue expanding their business operations and sources of revenue. At first, esports organizations and teams were following the model of traditional sports organizations, which is fine but the market and audience is different for the most part. Since, these organizations have focused more efforts towards building lifestyle brands based on apparel partnerships and content creators to bring their personalities closer to their audience to build a further connection to their fanbases. In adding content creators to their organizations, the teams can leverage the creators reach and audience to bring on new partnerships and sponsorships, while the creators get the back office and administrative capabilities of the organizations that they otherwise would not have access to.
3. The COVID-19 pandemic stopped traditional sports from holding events, and at first from happening altogether. With this, sports organizations needed to look elsewhere to connect with their fans and continue to increase their audience base. A flurry of traditional sports teams have entered the esports world through partnerships, collaborations, investing opportunities, and several other experiments. Over the last few years we have already seen plenty of big name athletes enter esports through investing or their own streaming and content creation, as the world slowly tries to go back to normal, specifically in terms of sports, it will be interesting to see how the two industries continue to not only coexist, but benefit each other.
4. With travel restrictions expected to be in place for the majority of 2021 at the least, big international tournaments that were once dominating the esports industry will be transformed into regional league play following positive results so far. If continued to be successful, this shift can become permanent with a smaller focus on international travel, and a bigger focus on league-based play and regional competition instead.
5. The final trend which isn’t directly about esports is that streaming platforms that have been used primarily for gaming content will be used even more for non-gaming related content. That already began throughout the pandemic as lockdown measures prohibited people from being together, so they needed new ways to interact, and companies and brands needed to find new ways to connect with their consumers. Twitch and Youtube became the top spots to host concerts, political events, live shows, or even just a platform for like-minded people to group together and talk.

Source: https://newzoo.com/insights/articles/newzoos-esports-trends-to-watch-in-2021/

With the gaming industry shifting towards a nearly complete digital world, many people, including us at GamingStreet were unsure about GameStop’s future. The new Xbox and PlayStation consoles both featured versions without disc drives, signalling that this could be the beginning of the end for video game discs, and in turn the retailers that sell them.

GameStop’s price target was on average in the US$12-15 range, and now is blowing that mark out of the water. The question people keep asking is how is this happening? Well, simply put; Reddit. It is home to endless amounts of day traders, and once these groups of people got word of others trying to short the stock, they put that to an abrupt halt. Allison Morrow of CNN put it best: “Note to short sellers: I didn’t think I needed to say this in 2021, but internet mobs are unpredictable, ruthless, and relentless.”

Since GameStop  went public in 2002, 100 million of the shares have been traded in one day, all three have happened in the last two weeks. It is truly remarkable was has transpired here. It goes against all the fundamentals of investing; they have had five different CEOs since 2017, sales and profit margins continuing to fall, and aren’t expected to turn a profit until 2023.

This just further proves the power of the internet, as the stock price continues to be volatile, where it goes next is extremely unclear. In the end, GameStop remains questionable from a fundamental perspective, and if the price drops down to the target average, the shares will lose more than 80% of its value.

Enthusiast is excited to announce that it has signed an integrated sponsorship deal with @Samsung. The multi-platform sponsorship will utilize the breadth of #EGLX’s reach in the coveted Gen Z and Millennial demographics. #gaming #esports https://t.co/wAeu6yVwQE

— Enthusiast Gaming (@WeAreEnthusiast) January 18, 2021

They have announced a new multi platform sponsorship deal with Samsung. The partnership is to leverage media advertising, custom content, esports sponsorships, influencer marketing, and entertainment activations across Enthusiast’s diversified fan engagement platform. This will include:

• Product placement and promotional activity with team influencers and brand ambassadors, including during live streamed content,
• Luminosity Gaming team sponsorship, including logo placements on team jerseys and at various entertainment activations,
• Custom content integrations within certain Enthusiast media Web and You Tube properties,
• Logo placement on social media channels,
• Display media advertising across Enthusiast media channels,
• Sponsorship of 2021 EGLX event

Enthusiast  is the largest gaming media network in North America with its 300 million monthly users across all their platforms. Their users are spread out across three divisions: media, events, and esports, and Samsung has hit each of these aspects in their deal. Utilizing Enthusiast’s media capabilities with their 100+ different web platforms and 1,000+ Youtube channels for advertisements and content integrations, sponsoring EGLX 2021, the largest gaming expo in Canada, and lastly sponsoring their esports team; Luminosity Gaming, which features some of the top teams and creators in the world such as xQc, Muselk, Tori Pareno, and Fresh.

CEO Adrian Montgomery had this to say on the deal: “We are thrilled to announce Samsung as an Enthusiast gaming partner and to work with them across our suite of integrated media, esports and entertainment assets to create awareness and drive share for their leading PC offerings, exclusively designed for gamers. It is an honour to work with Samsung, a global leader in electronics, and to have their logo on our Luminosity jerseys.“

Recent Headlines

In November, they announced their plan to list on NASDAQ, a natural step forward for Enthusiast Gaming  as they have received immense interest from investors both in the United States and internationally.

Back in December, they were ranked 7th on Forbes’ list of most valuable esports companies for 2020. Going from unranked the year prior to 7th is a steep improvement in itself, but there is a case that they should be even higher. Given the fact they have the highest estimated revenue total on the list, as well as their various avenues they use to generate that revenue besides esports, it could be seen that Enthusiast Gaming is the most valuable esports company, instead they received the lowest multiple due to their lower percentage of revenue tied to esports, which was used to estimate the valuation of each company multiplied by their revenue.

This isn’t Enthusiast’s only major partnership over the last couple of months. During the US Presidential election, they were enlisted by the Biden-Harris campaign in an effort to target gamers to go out and vote. Leveraging their roster of talented and popular influencers and creators, they were able to drive voter engagement through Fortnite maps. With 65 million of their 300 million monthly users residing in the US, the goal of the partnership was to be able to reach Gen Z and Millennial demographics, which comprises 70% of Enthusiast’s audience, making this a great way for the Biden-Harris campaign to connect with potential voters.

Enthusiast Gaming  keeps growing their audience and their partnership portfolio, making them one of, if not the most intriguing gaming company for 2021 and beyond. It will be great to see how this new Samsung sponsorship unfolds, and what else they have in store together for the future.

Bragg Gaming is an innovative online gaming solution provider, and with its primary asset ORYX Gaming, they offer a turnkey solution for retail, online, and mobile iGaming platform, and an advanced casino content aggregator, sportsbook, lottery, marketing, and operational service.

CEO Adam Arviv and newly appointed board member Paul Godfrey shared their thoughts on the news, as well as what it will do for Bragg  going forward:

“Uplisting to the Toronto Stock Exchange was one of my immediate goals when stepping into the CEO role,” said Arviv, adding “It’s a significant milestone in our growth strategy, and we’re pleased that our strong performance has allowed us to make the move to the senior market.”

“The listing on the TSX will generate increased awareness among institutional and global investors and will put the company squarely in the sights of major industry analysts,” Godfrey said, “As the global online gaming industry continues to expand at an exponential rate, investors are looking for companies with the technologies and expertise to lead the way, and Bragg is a prime example.”

This hasn’t been the only substantial news involving Bragg Gaming in January, as last week they announced a partnership with global online betting and casino operator, Betway. The deal includes Betway using ORYX Gaming’s entire RGS portfolio that includes games such as GAMOMAT, Kalamba Games, Givme Games, Golden Hero, CandleBets, Peter & Sons and Arcadem.

For a growing company in an emerging market this was the next step needed. With their recent partnership with Betway, along with the increased awareness to potential investors and other companies from the uplisting, Bragg is set up well to continue their growth.

The new G2 jersey will contain a number of unique features, such as AEROREADY technology which is designed to ‘keep the fabric dry and breathable’. Additionally, the jersey is set to include a ‘subtle hologram image’ of Carlos Rodriguez’s face, the founder and CEO of G2.

The deal does not stop there, on top of providing apparel for G2s esports players and the teams new jerseys, the two powerhouse European organizations will release a lifestyle apparel collaboration. This has been a trend over the last couple of years for several esports teams and organizations, as they have looked to expand their revenue avenues.

G2 continues to expand their partnership portfolio, as Adidas joins the impressive list that includes Domino’s, Pringles, Mastercard and BMW, among countless other big names brands.

Carlos Rodriguez had this to say on the partnership: “You can argue that there’s been a bunch of ‘non-endemic’ brands that have been included or involved in esports, but this is one of the first moments that I truly see that involvement goes beyond just putting the logo on a jersey or just appearing in the website as a logo. I think that this is very clearly different than most of the stuff you have seen already. After dealing with adidas throughout all these months and discussing with them strategy, and discussing with them a lot of matters, I can tell you already that adidas thinks unlike most corporations. They’re actually very ambitious and cutting edge in the way they think about where the next move should be.”

This partnership continues to prove how big esports has really become and how big it can be going forward. The gaming culture is continuing to grow, and big name brands like Adidas and others want to be a part of it. The audiences for esports teams want to be a part of the team, the more the organizations create these lifestyle brands and collaborations, the more their fans can connect with the teams and their players.

Source: https://esportsinsider.com/2021/01/g2-esports-announces-major-adidas-partnership/

Source: https://www.newswire.ca/news-releases/lg-ultragear-expands-global-esports-presence-with-gen-g-853841679.html

Already one of the most recognizable esports brands in the world, Gen.G is hoping to do so even further with this new partnership. The collaboration has the goal of further developing the competitive esports scene internationally through LGs new market-leading UltraGear gaming monitors. Gen.G already had initiatives focused on community and industry development with the Gen.G Global Academy, which hosts innovative esports education programs and competitive training. Now with this new partnership with LG, Gen.G will be able to further develop and expand esports within their communities. CEO of Gen.G Chris Park commented on the partnership: “With a young and dynamic brand such as LG UltraGear as our partner, we look forward to providing the ultimate gaming experience to not just professional players but to gaming fans across the globe.”

Gen.Gs second partnership announced over the last couple of days is with McDonalds. The partnership is with a number of the fast food chains franchisee locations in Southern California, and features esports initiatives in Los Angeles, San Diego, and Palm Springs.

There will be two main initiatives through the deal; first is a multi-week play-in tournament called ‘McDonalds Crew League’ for Southern California McDonalds employees only, where the staff will pick to compete in either NBA 2K21, FIFA, Smash, or Madden tournaments. The tournament will culminate in a live playoff broadcast on Twitch, with prizes awarded to the top-performing individual players. The second is a three day NBA 2K21 All-Star tournament: The McDonald’s SoCal All-Stars will begin on January 30th, where qualifying matches are held to help determine the top 12 competitors. Each team will be captained by a Gen.G pro player or coach during the finals, streamed live on Twitch.

The highest valued esports organization, TSM, has partnered with Cadillac, making them the exclusive automotive partner of TSM.

According to the release, the partnership is expected to include exclusive features for TSM and esports fans, such as social media content and videos, along with experiential events and activations at the TSM Performance Center.

The esports organization has also confirmed that Cadillac’s logo will be present on TSM’s new jersey. This is Cadillac’s first partnership with an esports team, as the automotive firm joins the likes of Honda, KIA, and BMW, among others, in supporting the esports space via sponsorship.

Cadillac’s sponsorship of TSM continues to strengthen the esports organizations commercial portfolio ahead of the 2021 LCS season. Along with the automotive firm, TSM also has partnerships with Logitech, Geiko, and Grubhub, to name a few.

Source: https://esportsinsider.com/2021/01/tsm-announces-cadillac-as-exclusive-automotive-partner/

Cathie Wood, doing what she does best, picking winners.#SKLZ #CathieWood #ArkInvest pic.twitter.com/95Cr21To6d

— Benzinga (@Benzinga) January 5, 2021

Cathie Wood; Founder, CEO, and CIO of ARK Invest  and one of their ETFs; ARK Next Generation Internet ETF purchased 215,000 shares of Skillz  this week.

Skillz is a mobile games platform that allows players to connect through competitions and tournaments. It gives franchises the opportunity to connect their players through a new form of gameplay. They are tailored for the smaller to midsized developer so those companies can generate revenue and build franchises without resorting to selling to a larger corporation or relying on selling advertising space. Consumers pay tournament fees, with the majority effectively going to the developers and Skillz retaining 14%.

Mid December, just prior the calendar turning over, Skillz went public via a special-purpose acquisition company (SPAC) called Flying Eagle Acquisition Corporation. Operating on the NYSE under the symbol ‘SKLZ’, experienced a strong start to its public domain.

So, why is it so important that Cathie Wood and ARK Next Gen bought into Skillz for an amount equating to just 0.07% of ARK’s holdings? Well the proof is right in front of us: Skillz stock increased over 20% since it was made public, and whenever ARK and Cathie Wood purchase shares of a stock, investors tend to follow, continuing to contribute to the stocks gain.

Currently, Skillz runs about 1,700 tournaments per second, and features an audience of roughly 2.7 million users per month. With over 10 million developers and 2.7 billion gamers globally in the mobile games sector, Skillz is primed to continue growth. The mobile games market is the largest in the industry, reaching an estimated US$86 billion in revenue in 2020. It has a lower barrier to entry compared to the other markets, and Skillz perfectly caters to the ease of that for both the players and developers.

Revenue grew over 90% over the last year, and heading into 2021 Skillz has US$250 million in cash and no debt. They estimate by 2025 the mobile gaming market will reach a value of US$150 billion, roughly doubling where it is at now. With top investors like Cathie Wood buying in, Skillz seems like a strong company for the future.

The suit is seeking unspecified damages, stating that CD Projekt made “false and/or misleading” statements about the games performance ahead of its December 10th release. With the game being seen by many as virtually unplayable, there was significant drop in the stock over the course of the last month.

The claim is based on the organization marketing the game as if it was “complete and playable” across all platforms when in fact there were immense technical issues causing Microsoft, Sony, and GameStop to accept returns and provide refunds. Sony went as far as removing the game from the PlayStation store. The bug and tech issues seemed to have been brushed under the rug with CD Projekt  acknowledging the issues back in a November conference call saying “we believe that the level will be as low as to let gamers not see them.”

Per the firms press release: “(1) Cyberpunk 2077 was virtually unplayable on the current-generation Xbox or Playstation systems due to an enormous number of bugs; (2) as a result, Sony would remove Cyberpunk 2077 from the Playstation store, and Sony, Microsoft and CD Projekt would be forced to offer full refunds for the game; (3) consequently, CD Projekt would suffer reputational and pecuniary harm; and (4) as a result, defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times. When the true details entered the market, the lawsuit claims that investors suffered damages.”

Even with the pending lawsuit and steep drop in stock, Cyberpunk was still able to have massive sales success, totalling 13 million copies solid which also includes the refund requests on all platforms. Of that 13 million, 8 million came from pre-launch sales which made it the largest PC launch ever.

Steam top sellers for the week ending Dec 27. Ordered by revenue ($):

1. Cyberpunk 2077
2. Valve Index VR Kit
3. Sea of Thieves
4. Hades
5. Raft
6. Phasmophobia
7. Grand Theft Auto V
8. Halo MCC
9. Red Dead Redemption 2
10. CS: GO – Operation Broken Fang (DLC) pic.twitter.com/pSAJX0ILVS

— Daniel Ahmad (@ZhugeEX) December 27, 2020

It has also been the top game on Steam, including 1 million concurrent players when it launched, which set a record for a single-player game. It is fun to imagine how historical of a launch this game could have been, considering gamers stuck with the game and continued to purchase it amidst the controversies since its release.

Class action lawsuits tend to take up time, so it is a wait and see game to see how the sales figures react to the news. This story is still fresh, but the drama surrounding Cyberpunk 2077 should continue on as we head into 2021.