GameStop has become a possible turnaround company despite its meme status among investors.
Just one year back, the video game retailing company was seeming like it was going toward bankruptcy instead of a renaissance. Despite numerous activist investors reviewing the dying company, the chances were great that GameStop was little more than a dead stock.
While I no longer believe GameStop is a losing investment (not at a reasonable price that is), I also believe investors will be better off putting their money into these two gaming stocks instead, as they have a better growth possibility ahead of them without the same risk that hovers over GameStop.
1. Sea Limited
Sea Limited is a diversified firm with three divisions: e-commerce, digital financial products, and its oldest sector, digital gaming, which also seems to be its most lucrative.
Sea’s Q1 results revealed their digital gaming sector generated $717 million in adjusted earnings before taxes and amortization, while e-commerce had an adjusted loss of around $412 million and digital financial experienced a $153 million loss.
Yet all three sectors are growing quickly, and while the digital entertainment division is certainly gaining from people being on lockdown, today it is still getting sales growth. In Q1, it more than doubled to $781 million, and the other segments gave even better gains.
The company’s quarterly active users went up by over 61% from the year-ago time to reach 648.8 million, and they were higher by over 6% sequentially.
Gaming is Sea Limited’s core engine, but when combined with the possibility for its e-commerce platform and its digital financial business, Sea’s long-term prospect looks very bright.
Esports will be huge. It is already big, but it’s growing rapidly, with total revenue expected to reach almost $1.1 billion this year, a 14.5% gain from last year. Within that number, analysts forecast over 75% will come from sponsorships and media rights. That serves the company Skillz perfectly.
Skillz is a platform giving an arena for gamers to compete against each other for prizes. Then it and the game developers split the profit. Since it is game-neutral and does not have the expense of really having to create games, Skillz can generate a huge profit margin.
Q1 gross margins were a huge 95%, a 100-basis-point uptick over the year-ago number. It also almost doubled revenue (up 92%), making it the 21st consecutive quarter it has given revenue growth, while increasing its full-year revenue expectations to $375 million, which is a 61% boost from 2020.
Author: Blake Ambrose