The growing penetration of internet services, cloud gaming, and interest in eSports has helped the video game industry grow significantly. Also, the pandemic-driven remote lifestyle has led to an increased focus on digital gaming. The global gaming market is expected to reach $256.97 billion by 2025. Also, the industry’s revenue is projected to reach $155.3 billion in 2021.
Due to supply chain bottlenecks, the production of hardware required for video games, such as headphones, monitors, and remotes, has been hampered. However, according to Hendrick Sin of CMGE, a Chinese game developer, China’s favorable video gaming regulations have positively influenced the gaming market. Investors’ interest in video game stocks is evident in the VanEck Vectors Video Gaming and eSports ETF’s (ESPO) 14.7% returns over the past year.
Hence, we think it could be worth watching video game stocks Enthusiast Gaming Holdings Inc. (EGLX), Super League Gaming, Inc. (SLGG), and Engine Gaming and Media, Inc. (GAME). Wall Street analysts expect these under-$5 stocks to rally by more than 110% in the near term.
Click here to check out our Video Game Industry Report for 2021
Enthusiast Gaming Holdings Inc. (EGLX)
Headquartered in Toronto, Canada, EGLX is a video game and esports company. Esports and Entertainment; Luminosity Gaming; the Vancouver Titans; and the Seattle Surge Call of Duty team are the company’s global esports franchises. EGLX operates approximately 100 gaming-related websites, produces 30 weekly shows, and represents approximately 500 gaming influencers across YouTube and Twitch.
In September, EGLX launched Project GG, a cross-platform and gaming-centric social network that is designed to unite gaming and esports fans on desktop and mobile. Project GG should enhance the company’s ability to deliver a fan experience with a targeted and personalized product for gamers and customers and represents a significant step towards EGLX’s evolution to becoming a technology-powered media, esports, and entertainment company.
EGLX’ s total revenue for the second quarter, ended June 30, 2021, increased 427.2% year-over-year to CAD37.06 million ($29.89 million). The company’s gross margin grew 149% from the year-ago value to CAD8.02 million ($6.47 million). Also, its cash rose 1,088% to CAD51.37 million ($41.43 million) for the six months ended June 30, 2021.
EGLX’s $128.38 million consensus revenue for the fiscal period ending December 2021 represents a 120.4% year-over-year increase. The company’s EPS is expected to grow 50.5% next year. The stock has surged 176.1% in price over the past year.
Closing the last trading session at $3.07, the $9.75 average analyst price target represents a 218.1% potential upside.
Super League Gaming, Inc. (SLGG)
SLGG is a gaming community and content platform that offers Minehut, Framerate, SLG.TV, Virtualis Studios, and City Clubs. The Santa Monica, Calif., company provides a social and gaming portal, a social video network in gaming, a virtual production studio, and various esports and entertainment programs. SLGG’s offerings include gameplay properties, content creation platforms, on-demand video series, and competitive gaming tournaments.
Last month, SLGG partnered with ClixTv, a new e-commerce-meets-entertainment platform, to broadcast SLGG’s esports and gaming content on ClixTv’s distribution of short-form series on a network of over-the-top (OTT) linear channels, as well as via the web and downloadable apps. Through ClixTv, SLGG intends to publish exclusive gameplay moments that are new to sports fans.
During the second quarter, ended June 30, 2021, SLGG’s revenue increased 234.6% year-over-year to $1.08 million. The company’s gross profit grew 164.9% from its year-ago value to $551,000. Its net loss decreased 49.4% from the prior-year quarter to $2.31 million. Also, the company’s loss per share declined 83.3% year-over-year to $0.08.
SLGG’s revenue is expected to increase 323.4% year-over-year to $8.74 million in its fiscal year 2021. Its EPS is estimated to grow 52.4% in the current year. Its stock has soared 89.5% over the past year.
The $7 consensus price target represents a 114.7% potential gain from its $3.26 last closing price.
Engine Gaming and Media, Inc. (GAME)
Incorporated in 2011, GAME is a Toronto, Canada-based multi-platform media group that offers esports, news streaming, and gaming. The company provides live electronic sports and interactive gaming experiences through partnerships with media companies under the UMG, Frankly Media, Stream Hatchet, Eden Games, and WinView brands.
Last month, one of GAME’s subsidiaries, UMG Gaming, started working with Logitech's ASTRO Gaming, Logitech Esports Services (including Beyond Entertainment), and Blue Microphones on a variety of production and social media collaborations and activations as the company renews its brand partnership with Gears Esports. With this collaboration, GAME plans to leverage its end-to-end tournament operations and product offerings seamlessly.
GAME’s revenues increased 360% year-over-year to $9.6 million for its fiscal third quarter, ended May 31, 2021. The company’s net income came in at $6.2 million, compared to a $104 million net loss in the prior-year quarter.
Analysts expect GAME’s revenue to increase 65.7% year-over-year to $60.1 million for its fiscal year 2022. Its EPS is expected to grow 46.3% next year.
Closing its last trading session at $3.90, the $14 average analyst price target represents a potential 259% upside.
Click here to check out our Video Game Industry Report for 2021
EGLX shares were trading at $2.97 per share on Thursday morning, down $0.10 (-3.26%). Year-to-date, EGLX has declined -16.77%, versus a 25.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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