During the coronavirus pandemic, gaming stocks have been on the rise. The GameStop (NYSE: GME) saga may have been the attention in recent weeks. But as good as speculation gets, stock prices will eventually have to reflect the fundamentals. However, there are much better ways to profit in the stock market than speculating on a former short-squeeze favorite.
Despite the stay-at-home orders and lockdown, in-home entertainment has prospered. It’s quite understandable as people sheltering at home are spending more time on gaming. In recent weeks, we saw household names in the video game industry such as Activision Blizzard (NASDAQ: ATVI) and Electronic Arts (NASDAQ: EA) reporting strong quarterly earnings. This is evidence that gaming companies have been benefiting a lot from the pandemic.
Gaming would of course be a ‘stay at home’ activity. With that, gaming companies would benefit from this predicament of the COVID-19 pandemic. Instead of joining the speculators and betting on GameStop’s longshot turnaround, investors may be better off considering either DraftKings (NASDAQ: DKNG) or HUYA (NYSE: HUYA) that are trending in the stock market today. But the real question here is, which gaming stock is the better bet?
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If you believe that online sports betting will be huge in the U.S., then you might want to add DKNG stock to your watchlist. With a year-to-date gain of nearly 40%, it is no surprise why many investors are eyeing DKNG stock. And this month, ARK Invest, which focuses on disruptive companies, disclosed a position in DKNG stock. You see, ARK Invest’s optimism is not unwarranted. With national online gambling growing at a rate of 13.2% annually and more states aiming for legalization, there are good reasons to believe that DKNG stock has more room to expand in the long run.The Largely Untapped Sports Betting Market Is Huge For DKNG Stock
From the company’s latest fiscal report, the company saw revenue rise 98% year over year to $132.8 million. The company also raised its full-year 2020 revenue range to $540 million-$560 million. That represents 25%-30% in annual revenue growth. If this isn’t impressive enough, the company provided 2021 revenue guidance of $750 million to $850 million. The guidance equates to 45% year-over-year growth. This comes at a time when many companies refrain from giving such projections.
“The resumption of major sports such as the NBA, MLB, and the NHL in the third quarter, as well as the start of the NFL season, generated tremendous customer engagement,” said CEO Jason Robins in a news release. “In addition to our year-over-year pro forma revenue growth of 42%, DraftKings recorded an increase in monthly unique players of 64% to over 1 million, demonstrating the effectiveness of our data-driven sales and marketing approach.”Source: TD Ameritrade TOS
As you may or may not know, New York governor Andrew Cuomo has expressed support for sports betting in his state. Meanwhile, recent news of the Texas governor’s office reaching out to New Jersey for advice on the legalization issue could be another booster jab for the industry. Given the favorable news, who knows, DKNG stock could find its way to new highs in the first quarter of 2021. The company expects to report its fourth-quarter earnings on February 26.HUYA Inc.
If you like eSports, HUYA stock could be one of the best gaming stocks to buy in the market. If the name is unfamiliar to you, fret not. HUYA is the largest online game streaming platform in China. HUYA’s plethora of rich and dynamic content combined with technological innovation makes it the ideal entertainment platform for the younger generation in China. People can stream video games on different platforms such as console, computer, and mobile. For the uninitiated, HUYA is currently working on its merger with DouYu International Holdings (NASDAQ: DOYU). When the deal is completed, it would create a live-streaming giant owning about 80% of the Chinese market.HUYA Plays Its Way To Success With eSports
Watching people play games is a huge thing in China. HUYA has been able to grow its HUYA Live audience by 18% to 172.9 million monthly average users. Additionally, it operates Nimo TV which is a game streaming platform in Southeast Asia and Latin America. While its services are free to use, users will have to pay to access premium content and features, thereby contributing to its cyclical nature.Source: TD Ameritrade TOS
Revenue rose 24% in its latest quarter, and adjusted net income soared 75%. Despite the strong growth and its market dominance, short interest represents approximately 30% of HUYA’s float. It’s only in anyone’s wildest imagination that HUYA may be the next target for another short squeeze. Nonetheless, the potential with HUYA is real. The stock is in a position for a huge run assuming the anti-monopoly headwinds from the government clears up.DKNG Stock Or HUYA Stock?
As a whole, DraftKings and HUYA are both great gaming stocks to consider buying for long-term investors. Both are highly potential companies in their respective niche. The online gambling sector is poised to enjoy strong growth in the foreseeable future. This comes as more states are looking for ways to get more revenue for their states. If you believe there’s a huge growth runway in the online sports betting space, then DKNG stock is probably a better bet.
On the other hand, if you are an avid gamer and are highly optimistic about the potentials of eSports and live streaming, HUYA stock may be a better investment. That said, investors who are keen to invest in HUYA stock may also want to pay close attention to the action of China’s state regulators regarding the merger with DouYu. Should the deal get the green light from the regulator, this could be a multibagger in the making. And if not, we could be in for a temporary setback here. Even without the merger, there is no denying that HUYA is still a leader in game streaming. The question is, would you be willing to take the risk?