Investors who are on the hunt for big growth in the years to come will need to identify sectors that are poised to thrive, as we move into the 2020s. Back in the summer, I’d discussed why the bio-pharmaceutical sector was attractive going forward.
Gaming stocks were a focus in an article I’d written in late 2018, but today I want to look at a different form of gaming that has posted massive growth over the past decade. Video games have grown into a premier entertainment product in the 2010s. Take-Two, the parent organization of video game publisher Rockstar, has released the two highest-grossing entertainment launches of all time in this decade: Grand Theft Auto V and Red Dead Redemption 2.
Newzoo, a games and e-sports analytics and market research firm, recently projected that the global gaming market would exceed revenues of $150 billion in 2019. Another report from GlobalData forecasts that the video games market could grow into a $300 billion industry by 2025. Much of this growth is due to the rise of mobile gaming as well as cloud gaming, which have branched far beyond the narrow market of the past. The development of virtual reality (VR) is also expected to have a significant impact on the growth of the market in the coming years.
One TSX gaming stock to watch before 2020
Enthusiast Gaming (TSXV:EGLX) is a Toronto-based digital media company that specializes in video game journalism. In September, the company was verified as the largest gaming network in the United States by Comscore, a Virginia-based media measurement and analytics company. The company has posted huge growth with regards to activity in comparison to its competitors. Unique visitors and views to its owned and operated property has achieved 107% and 148% growth, respectively.
The company had a busy October. It closed its acquisition of Steel Media, a leader in mobile gaming, early in the month. This added 20 mobile gaming websites and 25 live mobile events worldwide to its media and events business. It revamped its gaming media sales team to help direct advertising sales across its platform, which will operate in its offices in Toronto, New York, and Los Angeles. Later in the month, it entered a partnership with PartyCasino.Fun, a leading online casino.
In 2018, Enthusiast Gaming posted record revenue of $10.9 million, which was a 223% increase from the prior year. Gross profit jumped 200% to $1.5 million, while its comprehensive loss deepened to $19.1 million over $2.4 million in 2017. Enthusiast has been highly aggressive in 2019, but it may turn heads due to its worrying balance sheet.
Evaluating the stock right now
Growth in the global gaming and e-sports market is a promising sign for Enthusiast, but it is a high-risk, speculative addition in late 2019. However, it is one of the few TSX-listed stocks that offers exposure to this explosive market. Enthusiast is committed to an aggressive growth strategy, and investors willing to take on risk should consider targeting the stock going forward.
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Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Take-Two Interactive.