Three Stocks for the Next Gen Revolution
3 Stocks for the Next Gen Revolution
Thanks for taking the time to access my special investor’s report. My name’s Iain Butler and I’m the Lead Advisor of a service called Motley Fool Stock Advisor Canada.
For the past 20 years, The Motley Fool has helped thousands of investors stay on the bleeding edge of innovation — guiding them to market-crushing returns in the process by recommending companies like Amazon, Netflix, and Booking Holdings.
Video games touch the daily lives of hundreds of millions of players — both young and old — around the world. E-sports, or competitive video gaming, is drawing a rapidly growing audience that’s expected to surpass 450 million in 2020. As in any major entertainment industry, there’s plenty of money to be made. The companies you’re about to learn about are on the cutting edge of the trend, building the architecture for the global future of entertainment.
Once you’ve seen these stocks, I encourage you to read on to find out how you can discover more innovative and game-changing recommendations.
Electronic Arts, NASDAQ: EA
Whether you’re an avid console gamer, a casual waster of minutes on a smartphone, or a mere outside observer, there’s no getting around the impact of the gaming industry. It is a large and growing chunk of the global entertainment industry and well worth some representation in your portfolio. EA deserves particular attention. Anchored by some of the best-loved titles in the world, it continues to innovate its way through an increasingly digital world. It’s delighting gamers while also gaining in profitability — a win-win that will keep us in the game for years.
After sales more or less flatlined in fiscal year 2019, and the stock cratered in price over the same span of time, Electronic Arts looks like it is back on a positive trajectory. Its slate of video games still isn’t a perfect match for a shifting industry, but the gaming juggernaut — hated as it might be by some — has breadth and depth and no shortage of popular titles to choose from.
Nvidia, NASDAQ: NVDA
This is one of the companies in our Foolish universe that I (Iain here) have kicked myself for not putting forward since the inception of this service. Nvidia was first recommended by David Gardner in April 2005 with a cost basis of $6.58. Countless BBNs later, as well as three subsequent recommendations, the last of which occurred in January 2017, and Nvidia has become well entrenched in Foolish lore for the results it has contributed.
While I’ve been familiar with the company, and the rather meteoric rise that the stock has experienced, I’ve shied away. Funny what a >20% decline in a stock can do, however. Indeed, Nvidia peaked in mid-February at about US$314 and closed at US$252 on February 27. See what I mean about the opportunities that a broad market malaise can bring? The stock has since remained consistent at US$252 but still warrants significant consideration.
The hammering tech stocks in general took last quarter was exacerbated in Nvidia’s case by some inventory and trend misjudgment by management. In a nutshell, the demand for chips used in cryptocurrency mining dropped as crypto’s luster faded, and there’s been a surge of chip supply on the market as people move onto other things. It’s going to take a bit of time to work through that, and in the short term it’s taking a toll on Nvidia.
But this lull sure doesn’t change the long-term prospects for the company. Computing power demand at the level Nvidia’s graphical processing units can provide is growing steadily. Artificial intelligence, autonomous vehicles, and big data—not to mention Nvidia’s long-time business of making video game worlds come alive on our screens—all provide plenty of areas in continued need of Nvidia’s chips.
HUYA, NYSE: HUYA*
China is home to the world’s largest gaming market in terms of both revenue and total number of gamers. Both of these numbers are expected to rise at a double-digit rate through 2023, outpacing all other major markets. A top beneficiary to China’s thriving gaming industry is Huya, one of the country’s leading game live-streaming platforms.
We recommended Huya back on April 19, 2019, and it has been a wild ride in the weeks since thanks to the ongoing trade skirmish between China and the United States. Fortunately, the two countries are back on speaking terms and have made tentative progress towards a deal. To be sure, being that Huya is a Chinese company, it will no doubt continue to be impacted by these talks.
While trade talks have weighed on the stock (remember the opening message?), nothing has held back Huya’s growth. Its revenue more than doubled in 2018 and grew by more than 90% for the 12 months ended Sept. 30, 2019. In its most recent quarter, monthly active users grew 47.6% year over year, while paying users rose 28.5% to 5.2 million. In addition to strong top-line and user growth, Huya is profitable and has a significant runway for growth in the years ahead, making it one of the most attractive ways to invest in streaming, gaming, e-sports, and China.
*This stock is not part of the Stock Advisor Canada portfolio. It was recently recommended in our Hidden Gems, small cap stocks service.
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