By Matt McCallApr 04, 2018
In today’s connected world, you can literally become an overnight success more easily than at any time in human history. Think about videos that go viral after someone posts them on YouTube, Facebook, Twitter or Instagram. Even television news shows now have segments devoted to viral videos.
The same is true of many NexGen mega-trends, including video gaming and eSports. A video game called Fortnite is getting most of the buzz in the videogame industry right now. It wasn’t literally an overnight sensation, but it has quickly become a phenomenon with big numbers, celebrities and analysts talking about it as a game that appeals to the both the hard-core gamers as well as the mainstream. It’s also connected to one of my favorite stocks right now. (We’re up 45% in it in NexGen Investor, and I see a lot more to come.)
Fortnite came out last summer as a game for consoles and computers, and since then more than 150 million people have played it. Different modes have been added to it and recently it became available as a mobile app for Apple (AAPL) products. In just three weeks, there are already 365,000 reviews in the App Store.
Part of the reason this game has become such a phenomenon is that it is free to play but includes items for sale within it. Can you really make money giving away a game and hoping players spend money in the virtual world? Yep, at least in Fortnite’s case. The numbers show that one of the newest modes, Battle Royale, brought in an estimated $126 million in February.
Fortnite’s reach goes beyond the people who are playing the game to include those who are watching the people who are playing the game. That’s not my style, but apparently a lot of folks enjoy it. In fact, Amazon (AMZN) has a website called Twitch where you can watch others play video games live. Fortnite has been the most-watched game on Twitch, with nearly 15 million unique views during the last week of February.
Most recently, the popular rapper Drake went on Twitch to watch a session in which professional gamer Ninja (Richard Blevins) was playing. He is the most popular streamer on Twitch, and when Drake popped in, it resulted in nearly 630,000 views.
I have to share one more story from my hometown of Philadelphia, which is where NBA superstar and likely rookie of the year Ben Simmons plays for the 76ers. Simmons was streaming himself playing Fortnite and trying to get a fellow NBA all-star to join him all night. The player declined because he had a game the next day and he feared he would not get any sleep if he started to play.
Even real, old school athletes are turning to eSports as a new sport, and its reach continues to expand. eSports is definitely hitting the mainstream, and that’s when the numbers begin to explode. These games are no longer just for kids squirreled away in their rooms playing them when they’re not supposed to. There are professional leagues forming and dollars flowing (the eSports market is expected to hit $1.5 billion by 2020), and that means opportunity for investors.
Fortnite was developed by Epic Games, which you may or may not have heard of before today. I mentioned earlier that it was connected to one of my favorite stocks, and here’s how: Epic Games is 40% owned by Tencent Holdings (TECHY), which you also may or may not have heard of. If you haven’t, do yourself a favor and get to know this company.
Briefly, Tencent is China’s largest internet company and one of the world’s largest e-gaming companies. It also benefits from exposure to social media, eSports, e-commerce and the booming Asian middle class. You can see why I think this stock is a great long-term holding.
TCEHY has come off its highs recently in the broader tech selling and as a result of profit-taking after doubling over the last 12 months. The weakness has pushed TCEHY below its 50-day moving average (the blue line) and near an important price support level at $50 (the black line). While the 50-day average has acted as a longer-term floor, there have been instances in which the stock has breached it in the short term. Each time it has snapped back, though, and I believe that once this latest selling is done (likely in the near term) the same action will occur.
This company remains a NexGen leader, and my long-term outlook is as bullish as ever. That’s why I still have my NexGen Investor readers buying when we can get it below our desired price.
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