Should you buy Enthusiast Gaming (TSX:EGLX) stock after your profits?
Game enthusiast (TSX: EGLX) (NASDAQ: EGLX) is a Toronto-based company with operations in the media, content, entertainment and esports industries in the United States, Canada and around the world. The video game industry has experienced strong growth over the past decade. Today I want to discuss how this trajectory might work in favor of Enthusiast in the future. Additionally, we will review its recent quarterly report. Let’s go.
How has this game stock fared so far in 2022?
Shares of Enthusiast Gaming are down 28% in 2022 as of the August 15 close. Additionally, the stock plunged 58% in the year-over-year period. This happened after the stock hit a double-digit price in the spring of 2021. Unfortunately, it suffered a steady decline over the ensuing year.
The esports space has seen impressive growth over the past decade. Esports events have grown in popularity. Market researcher Grand View Research has estimated the global esports market to be valued at US$2 billion in 2021. Grand View forecasts the market to deliver a compound annual ground rate (CAGR) of 21.9% of 2022 to 2030. This is a market that investors should be eager to participate in.
Should investors be encouraged by recent earnings from Enthusiast Gaming?
Enthusiast Gaming reported its second quarter fiscal 2022 results on August 15. It posted 38% year-over-year revenue growth to $51.1 million. This was fueled by improving direct sales, rising subscription revenue and the acquisitions of Addicting Games and U.GG properties. Meanwhile, the company reported gross profit of $15.3 million, up 91% from a year earlier. This represented Enthusiast’s highest quarterly gross profit in its history.
Direct sales climbed 111% year over year to $9.3 million. This was driven by renewals and additional business with existing customers at Enthusiast. This accounted for 71% of direct sales in the second quarter of 2022. Additionally, subscription revenue jumped 75% from the second quarter of fiscal 2021 to $3.5 million. This was fueled by the growth of paying subscribers as well as “price optimization”. Paid subscribers grew 66% year over year to 258,000.
Operationally, Enthusiast has scored new business with giants like AdidasState Farm, HBO Max, Fanduel, Toyota, and others. During this time, it made progress with its new acquisitions which included the expansion of the U.GG desktop application. Additionally, the company introduced in-game advertising and play-to-win for a batch of Addicting Games titles.
Enthusiast Gaming: Is the title worth buying right now?
Canadian investors should be inspired to get into the esports business. Indeed, it is well positioned to grow in popularity in the years to come, and Enthusiast is in a great position to capitalize on this trend. Additionally, the company is on track for strong revenue growth in the future.
Shares of this gambling stock are trading in favorable value territory relative to its industry peers. I’m looking to grab this declining gaming stock after its Q2 earnings release.