Today we’ve got another spiel from the Motley Fool Canada to check out, all about a “next Netflix” opportunity… so what is it that they’re hinting at?
Let’s start with a little look at the ad — here’s the intro that caught our readers’ eyes:
“Discover Why Jeff Bezos is Dumping $970 Million into a Bizarre ‘2nd Coming of Netflix’…
“Not only will you find out why Bezos, the CEO of Amazon, is betting nearly a BILLION dollars on this surprising technology trend that he’s officially calling a “Global Phenomenon”…
“But you’ll also expose the ticker symbol of one under-the-radar stock we’ve officially started calling the ‘2nd Coming of Netflix’…”
Netflix has been the best teaser stock we’ve ever covered in this space, according to our tracking spreadsheets, so that’s worth investigating (it’s up about 14,000% since the Gardner brothers teased it for their Motley Fool Stock Advisor ad in 2007, just a few months after Stock Gumshoe was founded… and no, sadly, I didn’t buy shares).
What else do we learn about this one? First some more buildup of excitement from Jared George, one of the Motley Fool Canada writers (the ad is for Motley Fool Stock Advisor Canada, $179/yr, helmed by Iain Butler) …
“We can join a group of legendary investors who are betting on an entirely new, fast-emerging tech trend that has the potential to turn media moguls like Netflix on their head.
“Because even Netflix has told their shareholders that they ‘compete with (and lose to)’ this disruptive new trend…
“So when I found out that on top of that, Jeff Bezos, the CEO of Amazon, is one of the ground floor investors in this trend – my jaw hit the floor.”
And the person he keys on for this trend is someone who my kids are more likely to talk about than most pro athletes, Tyler Blevins…
“… when I heard this story of a kid from Chicago who stumbled on a wild craze that’s now making him a fortune, I genuinely didn’t believe it at first.
“But this story is completely true – and it all began with a 27-year old kid named Tyler Blevins.
“… Tyler grew up as an avid video gamer.
“In fact, he was so good that he even competed in a few tournaments as a teenager – and won thousands of dollars in the process.
“Despite blowing away the competition most of the time, he never really thought gaming would be anything more than a hobby and a way to occasionally make a few extra bucks…
“Which is why when he saw something highly-unusual happening on his computer screen, he immediately got goosebumps…
“Because what had simply been Tyler’s favorite pastime as a kid was turning into a money-making career…
“And all of a sudden, millions of people from around the world were paying to watch pro-gamers play video games online.”
So Tyler, who most kids will know as Ninja, started a streaming channel and other gamers started subscribing to watch him play video games… add on endorsements and the other stuff that generates cash for all pro athletes, and he’s making more than a million bucks a month doing what he loves to do. That’s pretty much the dream of every 12-year-old I know.
The connection to Bezos is that Amazon bought Twitch a few years back, and that’s the most well-known streaming service for video gamers (though plenty of them are also on YouTube and other platforms), and what the pitch is leading into is the general rise of “eSports” — a trend of turning video gaming into a large-scale sporting event through leagues, tournaments, and the like.
It’s still pretty early on, largely because there are so many companies involved, but it’s already a very large business. Here’s more from the ad:
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“THREE TIMES More People Are Watching Video Game Tournaments Than the Stanley Cup Playoffs and Super Bowl COMBINED ….
“… around 111.3 million people tuned in to watch the 2017 Super Bowl, one of the biggest sporting events in the world.
“But that same year, over 360 million people watched a tournament for League of Legends, one of the most popular video games in the world….
“… this opportunity is staggering no matter how you look at it… and the money being made is astounding.
“In fact, analysts at Digi-Capital did the math, and companies in this new age of entertainment should be worth $230 billion a year by 2021.
“That’s about 23X what Netflix made last year!”
OK, so if you pay attention to technology or video game investment trends you already know about eSports… I’ve been watching a couple stocks myself in recent months, wondering when might be a worthwhile time to try to place some bets on this trend. So I was curious, which specific stock are they recommending for this?
And we do get a few clues…
“… this ‘global phenomenon’ that has Jeff Bezos and David Gardner so riled up has Iain on the edge of his seat too.
“And he’s convinced that one innovative grassroots company is your single best way to get in on the ground-floor of this new-age entertainment wave right NOW.
“Because this industry disrupting company is taking advantage of the same trend that’s helping pro-gamers like Ninja make millions every month…
“And it’s copying Netflix’s unique strategy to a tee as it caters to an audience of over 2.5 billion gamers around the world.”
What other clues do we get to narrow it down?
“… this dark-horse company is creating its own library of original content, much like Netflix has done with TV shows and movies, but for video games.
“And they already have a subscriber base of over 300 million people around the world – more than DOUBLE the current subscribers to Netflix.
“This company is rapidly building momentum and it even earned an exclusive partnership with one of the world’s biggest entertainment titans, Disney.
“That deal alone single-handedly resulted in well-over $500 million worth of revenue for this trailblazing company.”
What else do we learn?
The stock has “skyrocketed” 268% in the past five years, so it’s not some unknown little startup. And it’s currently trading at “one of the lowest prices we’ve seen in over a year” (though that would be true of almost any substantial video game company right now).
And that’s about it… so, Gumshoe readers wanna know, who is it? Thinkolator sez this is… Electronic Arts (EA), which, like the other major video game companies Activision Blizzard (ATVI) and Take Two Interactive (TTWO) got clobbered in the second half of last year, and released disappointing earnings, but has started to recover a little bit.
The story driving everything, really, is Fortnite… the “battle royale” video game phenomenon that has been taking viewers away from Netflix and gamers away from their other favorite console games, resulting in disappointing numbers in the past quarter or two for the big game publishers. Fortnite is both good and bad for video game publishers — it’s a symbol of the importance of video games, including streaming video games that require relatively low-power equipment (it can be played on a phone or your Xbox or Playstation, with live low-latency battles involving players on different continents), but it’s also a huge and global hit with shocking staying power (so far, at least) that wasn’t created by the major publishers and isn’t owned by them (its developer is private, though partly owned by Chinese giant Tencent).
And that fear of Fortnite, really, is what has driven these stocks down from “beloved hitmakers with eSports potential” to “losers who can’t compete with Fortnite”. Probably neither tag was really accurate, but investors love to think in extremes and these stocks got awfully expensive at their mid-2018 heights and pretty much all got cut in half at the end of 2018 before recovering slightly… a really big deal for what are very large companies. Electronic Arts and Activision Blizzard are both $30+ billion companies, so back at their heights the two of them combined were almost as big as Netflix, with similar revenue numbers.
Electronic Arts has lately been the best performer, though, with a narrative that quickly changed after their disappointing earnings report last week — at first the stock fell a bit further, down to $80, as it was another “Fortnite is cutting into our