Gaming stocks are having a good run, but they don’t have new video game titles to thank. According to E*TRADE, the strength of the sector has more to do with new markets that video game comapanies are branching into – namely eSports.
In a blog post, E*TRADE Financial Corporation (ETFC) said that gaming stocks as a whole have been having a good run, with Activision Blizzard, Inc. (ATVI) stock up around 12% this year even after the stock market correction and up 59% from a year ago. Meanwhile, the ETFMG Video Game Tech ETF (GAMR), the first-ever video game stock exchange-traded fund (ETF), has been outperforming the Nasdaq 100 since it was launched in March 2016. That is pretty impressive performance even for technology stock standards.
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“Although it may seem like the prevailing dynamic of the video-game industry would be a perennial battle of creating compelling new games and upping the experiences of old ones, Activision has made a splash by branching out into eSports – the growing ‘spectator sport’ of watching the best gaming gladiators compete in the digital coliseum,” wrote the New York-based online brokerage in the blog post.
The online brokerage said that Activision’s Overwatch League, which was launched earlier this year and takes a page from traditional pro sports leagues, but for video game players, is driving the upside in the stock. The so-called cyber athletes compete in Overwatch matches, with viewers able to watch the battle in person at arenas or online via live streaming. If that sounds a little too geeky, E*TRADE pointed out that there are 12 cities and teams participating in the league, with one team backed by Robert Kraft, the owner of the New England Patriots. Meanwhile, Stanley Kroenke, owner of the Los Angeles Rams, paid $20 million for an Overwatch team.
Aiding the growth of eSports, Activision has partnered with Twitch, the streaming gaming service owned by Amazon.com, Inc. (AMZN), to broadcast the games. “For those not clued into the magnitude of the video game universe, Overwatch has a 35-million-strong player base – quite the potential audience for its eSports league. The initial match on Jan. 10 drew as many as 350,000 viewers on the Twitch platform alone,” wrote E*TRADE.
The online brokerage noted that, since Activision’s fourth quarter earnings release in early February in which it posted results that beat on both the earnings and revenue side, analysts have raised their ratings on the gaming company.
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