Investing in e-Sports: Activision and Take Two

12/04/2017 5:00 am EST

Focus: CONSUMER

Tony Daltorio

Editor, Investors Alley Premium Digest

This digital age in which we live is literally changing everything—including when it comes to sports. Welcome the world of e-sports, explains Tony Daltorio, editor of editor of Investors Alley Premium Digest.

This a huge business that is growing rapidly. E-sports attracts serious gamers. There are tournaments where there is a $10+ million top prize.

There are three main areas where e-sports can produce revenues. First is direct payments from live streaming services – some live tournaments have tens of millions of viewers. Last year, there were 11.1 billion e-sports videos streamed in China and 2.7 billion in North America, where about one-third of gamers reside.

The next source of revenue is the sale of content rights to broadcasters. Finally, advertising revenues, which today come largely from the gaming industry. But it isn’t hard to imagine a whole raft of companies looking to get their message in front of millions of viewers. That new reality is already beginning to unfold.

So how can you invest into this e-sports phenomena? At the top of my buy list is Activision Blizzard (ATVI), which also has a live streaming channel called Major League Gaming. It acquired the firm in 2016 for $46 million.

I believe its CEO, Bobby Kotick, really understands the video gaming and e-sports better than the CEOs at its rivals. He sees e-sports as becoming more broad-based in its appeal in 2018 and I agree. During the company’s latest earnings conference call, he said “We view that (e-sports) as a major growth initiative and a very sizable standalone opportunity for the company.”


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The company is already enjoying the growth in the general gaming industry with $1 billion from in-game (digital games) revenues in the last quarter. It currently has eight $1 billion franchises, including the very popular Call of Duty.

Not surprising then Kotick raised the company’s guidance for the next quarter and that the stock is up nearly 75% year-to-date and almost 60% over the past year.

Next on the list is a rival of Activision, Take Two Interactive Software (TTWO), which is best known for its Grand Theft Auto franchise. Its stock soared nearly 10% after its recently-released earnings report.

While trailing in the e-sports business, the company is finally moving ahead now. It inked a deal with the NBA to launch a NBA eLeague. The NBA will be the only major professional sports league to have its own e-sports league. The league will begin in May 2018 with so far 17 of the 30 NBA teams saying they will play for at least three years.

Take Two is also expanding rapidly into mobile games. It strengthened this area of the company with its acquisition of Barcelona-based Social Point for $250 million earlier this year. Social Point is one of the most prolific mobile games developers.

Again not surprisingly, Take Two management also raised guidance for its next quarter. Its stock has even outperformed Activision with a 133% gain for the year so far and it has risen 140% over the past 12 months.

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