One Factor in eSports Stocks that Analysts aren’t Considering

esports stock

By now you’ve probably heard all about the gaming boom, as well as the resulting eSports stock boom.

There’s a good chance you’ve seen the charts projecting eSports to double in revenue from $845 million USD in 2018 to $1.79 billion in 2020. Perhaps you’ve also read reports that high schools across America are now establishing eSports leagues, ensuring the next generation will be even more dedicated to competitive gaming.

It’s well known that eSports are beginning to eclipse traditional sports. This is no longer a big investor secret. By 2021, more Americans will be watching competitive gaming tournaments like League of Legends and Overwatch than there will be watching hockey, basketball, or baseball. The popularity of eSports can simply no longer be denied.

But amidst all the eSports stock and investment advice out there, one important factor is being ignored by most analysts. That factor is the gaming community itself, and how its attitude towards one company or another can turn on a dime.

Before you invest in a gaming company, do your research to find out how that company is seen by the people who actually invest their time and money into eSports. You might find that one of the major players in video games today might soon have an embargo placed on it by the community.

Here are some eSports stocks that are currently at risk of being blacklisted by eSports players, as well as a few that are building both brand recognition and trust among the community.

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A Big Name Company Doesn’t Mean Big eSports Stock Potential

Electronic Arts Inc. (NASDAQ:EA) is a notable company in the gaming space for two reasons. The first reason is that it’s the second-largest video game company in the western world. The second is that it has repeatedly been named the worst company in America.

The laundry list of gamer grievances against EA is almost as long as the company’s list of titles. Its decision to put “micro-transactions” into its games led to a massive online backlash from the “male, age 18-34” demographic that it should be wooing. And, if that wasn’t enough, it also led EA to create the most down-voted comment in Reddit history.

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While Electronic Arts remains a titan of the gaming industry, it has been mostly unable to reap the benefits of the eSports boom. In May, the company reported a 22 percent reduced net revenue for Q4 2019 compared to the same quarter of fiscal year 2018. The company’s year-over-year revenue also decreased by approximately $200 million.

Another major company that gamers are turning their backs on is Activision Blizzard Inc. (NASDAQ:ATVI). As the publisher of Overwatch—one of the most popular eSports titles—ATVI should be the hottest eSports stock on the market.

Instead, the company’s stock price has been in a slump since last fall, when it fell 35 percent. It seems eSports simply have not moved the needle for Activision yet, despite the fact that the company has been investing heavily in the sector.

This might be because, like EA, Activision decided to double down on “pay-to-win” mechanics in its games, which has caused player engagement to wane significantly in the last year. The company’s reliance on “lootboxes” in its popular mobile game Candy Crush was even cited by a US senator as an example of predatory practices in the gaming industry.

Look to the Companies that are Building Community Trust

As you can tell, a big part of how a gaming company is perceived by the community is in how the company capitalizes off of its customer base. Monetization strategies like lootboxes and micro-transactions are seen as unfair by a lot of gamers, as they make games about the competition. This is why EA and Activision are not capturing a significant portion of the eSports market.

Investors should consider putting their money into an eSports stock from a company that is building its reputation among gamers. One such company, Enthusiast Gaming (TSXV:EGLX) (OTCQB:EGHIF), just resumed trading on the TSXV under the symbol EGLX. Enthusiast is notable for having not only one of the largest gaming conventions—the Enthusiast Gaming Live Expo—but also the fastest growing online community of gamers. The company has even been called “the best pure public stock investment in eSports.”

Watch this space for more information about Enthusiast and other reputable eSports companies in the future.

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Featured image: DepositPhotos © markcarper

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