The Future of Esports: Emerging Trends and Market Potential
The esports sector is experiencing significant growth and transformation, driven by evolving trends and increased investment. According to The Business Research Company, the global esports market was valued at $1.63 billion in 2023. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 16.4% during 2024-2028 to reach $3.48 billion by ?the end of the forecast period.
Technological advancements continue to shape the future of esports. The integration of generative AI in gaming is creating more immersive experiences, while cloud gaming continues to gain traction. As these technologies evolve, they are expected to enhance player engagement and expand the esports audience.
Another key trend is the rise of live streaming. This also offers exciting avenues for both content creators and advertisers looking to connect with a dynamic audience. Comscore's 2024 State of Gaming Report revealed that gamers spent 45 billion hours on online video content in 2023.
Esports and live streaming are gaining traction, particularly among younger generations. The report shows that about 86% of Gen Z and 80% of Millennials who are aware of esports have watched it. Additionally, 53% of Gen Z and 61% of Millennials have engaged with live streaming. The report also highlights that 79% of viewers prefer watching esports with others. This indicates the social nature of esports.
The rise of platforms like Twitch and YouTube Gaming has made esports more accessible, further fueling interest and participation.
Additionally, the Middle East is emerging as a significant market for esports, thanks to initiatives like Saudi Arabia's Vision 2030, which aims to diversify the country’s economy. Major events, such as the Esports World Cup held in Riyadh, have drawn thousands of participants and substantial prize pools, showcasing the region's potential. Here’s a short excerpt from our previous article “7 Best Gaming Stocks To Buy Now” that discusses this in more detail:
“In July and August, the first-ever Esports World Cup took place in Riyadh, Saudi Arabia, attracting over 1,500 players and offering a massive prize pool of $60 million. The event spanned eight weeks and included 23 competitions across 22 different video games, such as Call of Duty and Fortnite.”
Overall, the esports sector is poised for continued growth. As organizations adapt to new market dynamics and leverage innovative technologies, the future looks promising for investors interested in this vibrant industry.
Methodology
To compile our list of the 8 best esports stocks to buy according to hedge funds, we used the Finviz and Yahoo stock screeners to find the largest gaming and esports companies. We also reviewed our own rankings and consulted various online resources. We carefully verified our list to remove any companies that can not be classified as esports stocks. Next, from an initial pool of more than 20 esports stocks, we focused on the top 8 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 8 best esports stocks to buy are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Two gamers enjoying an immersive experience playing together online via their gaming console.
NetEase Inc. (NASDAQ:NTES) is a prominent Chinese internet technology company that specializes in gaming, education, and e-commerce. It has developed a diverse range of popular mobile and PC games for both domestic and international markets. By creating its own titles and partnering with global companies, NetEase has steadily expanded its gaming portfolio.
On March 27, 2024, the company announced a partnership with Sandsoft Games to establish a joint venture aimed at game publishing and esports activities in the MENA region. This collaboration combines NetEase’s (NASDAQ:NTES) extensive gaming experience with Sandsoft’s local expertise, positioning the company to tap into one of the fastest-growing gaming markets while supporting Saudi Arabia's Vision 2030.
During Q2 2024, NetEase Inc. (NASDAQ:NTES) launched several successful games, including the multiplayer survival game Once Human, which quickly attracted over 230,000 peak concurrent users shortly after its release in July. The game topped Steam's sales top-seller chart in 12 countries after an update in August, achieving over 10 million downloads. Additionally, the company launched its battle royale game Naraka: Bladepoint Mobile in late July. The game gained the third spot on the iOS grossing chart shortly after launch.
In Q2 2024, the company reported a total net revenue of $3.5 billion, a 6% increase from the same quarter in 2023. Revenue from games and related services grew by 7%, driven largely by mobile titles like Identity V and Justice Mobile. Mobile games accounted for about 76.4% of total online game revenue, highlighting their critical role in the company's growth strategy.
With a compound annual growth rate (CAGR) of 26% in revenue and 20% in net income over the past decade, NetEase Inc. (NASDAQ:NTES) presents an attractive investment opportunity in the booming mobile gaming market. Its strategic partnerships and successful game launches position it well for future growth in the esports sector.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 35 hedge funds held stakes in NetEase Inc. (NASDAQ:NTES). As of June 30, Orbis Investment Management holds 1.9 million shares of the company, valued at $182.28 million, making it NetEase Inc.’s (NASDAQ:NTES) most prominent shareholder.
Overall NTES ranks 6th among the best esports stocks to buy according to hedge funds. While we acknowledge the potential of NTES as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NTES but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
