In this article, we will explore the 8 best esports stocks to buy according to hedge funds.
The Future of Esports: Emerging Trends and Market Potential
The esports sector is experiencing significant growth and transformation, driven by evolving trends and increased investment. According to The Business Research Company, the global esports market was valued at $1.63 billion in 2023. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 16.4% during 2024-2028 to reach $3.48 billion by the end of the forecast period.
Technological advancements continue to shape the future of esports. The integration of generative AI in gaming is creating more immersive experiences, while cloud gaming continues to gain traction. As these technologies evolve, they are expected to enhance player engagement and expand the esports audience.
Another key trend is the rise of live streaming. This also offers exciting avenues for both content creators and advertisers looking to connect with a dynamic audience. Comscore’s 2024 State of Gaming Report revealed that gamers spent 45 billion hours on online video content in 2023.
Esports and live streaming are gaining traction, particularly among younger generations. The report shows that about 86% of Gen Z and 80% of Millennials who are aware of esports have watched it. Additionally, 53% of Gen Z and 61% of Millennials have engaged with live streaming. The report also highlights that 79% of viewers prefer watching esports with others. This indicates the social nature of esports.
The rise of platforms like Twitch and YouTube Gaming has made esports more accessible, further fueling interest and participation.
Additionally, the Middle East is emerging as a significant market for esports, thanks to initiatives like Saudi Arabia’s Vision 2030, which aims to diversify the country’s economy. Major events, such as the Esports World Cup held in Riyadh, have drawn thousands of participants and substantial prize pools, showcasing the region’s potential. Here’s a short excerpt from our previous article “7 Best Gaming Stocks To Buy Now” that discusses this in more detail:
“In July and August, the first-ever Esports World Cup took place in Riyadh, Saudi Arabia, attracting over 1,500 players and offering a massive prize pool of $60 million. The event spanned eight weeks and included 23 competitions across 22 different video games, such as Call of Duty and Fortnite.”
Overall, the esports sector is poised for continued growth. As organizations adapt to new market dynamics and leverage innovative technologies, the future looks promising for investors interested in this vibrant industry.
Now that we have discussed what’s going on in the world of esports, let’s take a look at the 8 best esports stocks to buy according to hedge funds.
A group of professional gamers in the middle of a tournament, demonstrating the high-energy of the competitive gaming scene.
Methodology
To compile our list of the 8 best esports stocks to buy according to hedge funds, we used the Finviz and Yahoo stock screeners to find the largest gaming and esports companies. We also reviewed our own rankings and consulted various online resources. We carefully verified our list to remove any companies that can not be classified as esports stocks. Next, from an initial pool of more than 20 esports stocks, we focused on the top 8 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 8 best esports stocks to buy are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 Best Esports Stocks to Buy According to Hedge Funds
8. Bilibili Inc. (NASDAQ:BILI)
Number of Hedge Fund Holders: 25
Bilibili Inc. (NASDAQ:BILI) is a Chinese online entertainment company that offers a wide range of digital content, including videos, games, and live streaming services. The company allows users to interact with streamers and gamers, creating an engaging community experience. It also owns Bilibili Gaming (BLG), a professional esports organization that competes in popular games like League of Legends and Overwatch. Bilibili Inc. (NASDAQ:BILI) has a diversified business model. It primarily generates revenue from mobile games, value-added services, advertising, and e-commerce.
The company is focused on attracting high-quality content creators to enhance its platform, which has led to impressive growth in user engagement. In the second quarter of 2024, Bilibili Inc. (NASDAQ:BILI) reported that average daily video views increased by 18% year-over-year, reaching over 4.8 billion. The company’s total revenues rose by 16%, driven primarily by a 30% increase in advertising revenue and growth in its games and value-added services.
The strong performance in advertising and gaming has significantly boosted Bilibili’s gross profit, which increased by 49% year-over-year. Bilibili Inc. (NASDAQ:BILI) is successfully engaging its community. In the second quarter, average daily active users (DAUs) were 102.3 million, up 6% year-over-year. Bilibili’s DAUs spent an average of 99 minutes on the platform in Q2 2024, up from 94 minutes in Q2 2023.
As one of the best esports stocks to buy, Bilibili Inc. (NASDAQ:BILI) has managed to grow its revenue at a compound annual growth rate (CAGR) of 15% over the past three years.
These factors make Bilibili Inc. (NASDAQ:BILI) a compelling investment opportunity in the esports sector. As of the second quarter of 2024, Bilibili Inc. (NASDAQ:BILI) was held by 25 hedge funds, according to Insider Monkey’s database.
7. Sony Group Corporation (NYSE:SONY)
Number of Hedge Fund Holders: 29
Sony Group Corporation (NYSE:SONY) is a Japanese multinational conglomerate. It is a major player in the gaming industry, particularly through its subsidiary, Sony Interactive Entertainment. Known for the iconic PlayStation brand, the company develops and sells popular gaming consoles like the PlayStation 4 and PlayStation 5, which have a loyal customer base.
The company is also heavily invested in esports through initiatives like PlayStation Tournaments and the annual EVO fighting game series. Recently, in March 2024, Sony Group Corporation (NYSE:SONY) partnered with the Esports World Cup to further its involvement in the esports community, demonstrating its commitment to expanding its influence in this rapidly growing sector.
As of June, Sony Group Corporation (NYSE:SONY) reported 116 million monthly active PlayStation accounts, a 7% increase year-over-year. Total play time also saw an increase of 8% from the previous year. This growing user base is driven by popular games like Helldivers 2 and the PC version of Ghost of Tsushima. Upcoming releases, including Concord and God of War Ragnarok for PC, are expected to further boost player interest and engagement.
On September 10, 2024, Sony (NYSE:SONY) revealed the PlayStation 5 Pro, designed to enhance gaming experiences with advanced features like improved GPU performance and AI-driven upscaling. Set to launch on November 7, 2024, this new console aims to deliver sharper images and smoother gameplay, appealing to both casual gamers and esports enthusiasts.
Sony’s (NYSE:SONY) focus on innovation and community engagement positions it well for future growth. With its strong lineup of exclusive games and commitment to enhancing user experiences, Sony Group Corporation (NYSE:SONY) represents a compelling investment opportunity in the esports space.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 29 hedge funds held stakes in Sony Group Corporation (NYSE:SONY).
6. NetEase Inc. (NASDAQ:NTES)
Number of Hedge Fund Holders: 35
NetEase Inc. (NASDAQ:NTES) is a prominent Chinese internet technology company that specializes in gaming, education, and e-commerce. It has developed a diverse range of popular mobile and PC games for both domestic and international markets. By creating its own titles and partnering with global companies, NetEase has steadily expanded its gaming portfolio.
On March 27, 2024, the company announced a partnership with Sandsoft Games to establish a joint venture aimed at game publishing and esports activities in the MENA region. This collaboration combines NetEase’s (NASDAQ:NTES) extensive gaming experience with Sandsoft’s local expertise, positioning the company to tap into one of the fastest-growing gaming markets while supporting Saudi Arabia’s Vision 2030.
During Q2 2024, NetEase Inc. (NASDAQ:NTES) launched several successful games, including the multiplayer survival game Once Human, which quickly attracted over 230,000 peak concurrent users shortly after its release in July. The game topped Steam’s sales top-seller chart in 12 countries after an update in August, achieving over 10 million downloads. Additionally, the company launched its battle royale game Naraka: Bladepoint Mobile in late July. The game gained the third spot on the iOS grossing chart shortly after launch.
In Q2 2024, the company reported a total net revenue of $3.5 billion, a 6% increase from the same quarter in 2023. Revenue from games and related services grew by 7%, driven largely by mobile titles like Identity V and Justice Mobile. Mobile games accounted for about 76.4% of total online game revenue, highlighting their critical role in the company’s growth strategy.
With a compound annual growth rate (CAGR) of 26% in revenue and 20% in net income over the past decade, NetEase Inc. (NASDAQ:NTES) presents an attractive investment opportunity in the booming mobile gaming market. Its strategic partnerships and successful game launches position it well for future growth in the esports sector.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 35 hedge funds held stakes in NetEase Inc. (NASDAQ:NTES). As of June 30, Orbis Investment Management holds 1.9 million shares of the company, valued at $182.28 million, making it NetEase Inc.’s (NASDAQ:NTES) most prominent shareholder.
5. Electronic Arts Inc. (NASDAQ:EA)
Number of Hedge Fund Holders: 40
Electronic Arts Inc. (NASDAQ:EA) is a leading American video game company known for developing and publishing popular titles like Madden NFL, The Sims, Battlefield, and FIFA, one of the largest esports games globally. The company is actively involved in the interactive entertainment industry, offering games across various platforms, including consoles, PCs, and mobile devices.
On September 17, 2024, EA hosted its Investor Day, where it outlined its growth strategy focused on building large online communities and creating blockbuster gaming experiences. The company plans to leverage AI to enhance operations and is optimistic about the future of its EA SPORTS brand. Electronic Arts Inc. (NASDAQ:EA) is looking to launch a new Battlefield experience with community testing planned for early 2025.
The company’s management also shared its plan to launch a new EA SPORTS app that aims to expand its business beyond gaming. This socially-driven app will feature sports content, live data, and interactive elements focused on global football, allowing fans to engage with their favorite teams and players. By integrating these features, EA is positioning itself to connect with a broader audience and enhance the overall fan experience, which supports its goal of significant growth in the gaming and entertainment sectors.
In Q1 FY25, Electronic Arts Inc. (NASDAQ:EA) reported net bookings of $1.262 billion, exceeding expectations. This growth was fueled by strong performances from Madden NFL 24 and FC Online. The company’s net revenue was $1.66 billion in the first quarter of fiscal 2025.
With its established franchises and a clear strategy for future growth, Electronic Arts Inc. (NASDAQ:EA) represents a solid investment opportunity in the esports market. The company’s focus on innovation and community engagement positions it well for success in the competitive gaming landscape.
Over the past 3 years, Electronic Arts Inc. (NASDAQ:EA) has achieved a compound annual growth rate (CAGR) of 8% in its revenue, while its net income has grown at a CAGR of 19% during the same period.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 40 hedge funds held stakes in Electronic Arts Inc. (NASDAQ:EA). EA ranks among the top 5 on our list of the best esports stocks to buy according to hedge funds.
4. Take-Two Interactive Software Inc. (NASDAQ:TTWO)
Number of Hedge Fund Holders: 48
Take-Two Interactive Software Inc. (NASDAQ:TTWO) is a major American video game holding corporation. It owns well-known labels like Rockstar Games and 2K, featuring popular franchises such as Grand Theft Auto, Red Dead Redemption, and NBA 2K. The company also has a stake in the NBA 2K League, a professional esports league created in partnership with the NBA, which enhances its presence in the growing esports market.
In the first quarter of fiscal year 2025, the company reported total net bookings of $1.22 billion, which is a 1% increase year-over-year. A significant portion of this revenue comes from recurrent consumer spending, which accounted for 83% of total bookings. Titles like NBA 2K24 and Grand Theft Auto Online continue to drive strong performance, showcasing Take-Two’s (NASDAQ:TTWO) ability to maintain player engagement through popular games.
On September 6, 2024, Take-Two Interactive Software Inc. (NASDAQ:TTWO) announced the launch of NBA 2K25, introducing advanced gameplay features powered by ProPLAY technology. The game features more than 9,000 new animations derived from real NBA footage. This new version of the game includes exciting new modes, enhancing the gaming experience for players. Such innovations not only attract new users but also keep existing players invested in the franchise.
With its established brands and focus on engaging players through innovative releases, Take-Two Interactive Software Inc. (NASDAQ:TTWO) presents a compelling investment opportunity in the esports market. The combination of a loyal customer base and ongoing growth strategies positions the company well for future success.
Over the past 5 years, the corporation has grown its revenue at a compound annual growth rate (CAGR) of 13%.
Analysts are bullish on TTWO. Analysts currently hold a consensus buy rating on the stock and the 1-year median price target of $185.00 set by analysts indicates a potential upside of more than 15% from current levels.
As of the second quarter of 2024, Take-Two Interactive Software Inc. (NASDAQ:TTWO) was held by 48 hedge funds, according to Insider Monkey’s database.
3. Roblox Corporation (NYSE:RBLX)
Number of Hedge Fund Holders: 54
Roblox Corporation (NYSE:RBLX) is a leading American video game developer that ranks among the top 3 on our list of the best esports stocks to buy according to hedge funds. The company created Roblox, a versatile gaming platform that lets users design, share, and play games made by other users. With free access to millions of games, Roblox generates revenue through in-game purchases using its virtual currency, Robux. This model not only attracts a large player base but also encourages developers to create engaging content, as they can earn Robux that can be converted into real money.
In 2021, Dubit, a game studio focused on the Metaverse and esports, raised $8 million to launch the first live esports league in the Metaverse on Roblox. This initiative highlights the growing interest in competitive gaming within virtual environments. Additionally, Roblox hosts numerous community-run esports tournaments, further establishing its role as a key platform for esports engagement.
In Q2 2024, Roblox Corporation (NYSE:RBLX) reported strong financial growth, with revenue reaching $893.5 million, a 31% increase year-over-year. The platform saw a record 79.5 million average daily active users, reflecting a 21% growth from the previous year. These impressive metrics highlight the platform’s popularity and engagement, making it an attractive investment.
The company is also expanding its offerings beyond gaming. During the Q4 2024 earnings call, management shared that Roblox Corporation (NYSE:RBLX) is venturing into e-commerce by partnering with Walmart to test shopping experiences within the platform. The company’s diversification into social interaction, shopping, and education enhances its business model.
Hours engaged hit a record 17.4 billion in Q2 2024, up 24% compared to the same period in the previous year, with significant growth in key markets like Japan and India. With its strong user engagement and ongoing expansion into new areas, Roblox Corporation (NYSE:RBLX) presents a compelling opportunity for investors looking to increase their exposure to the esports market.
The combination of a robust gaming platform and innovative business strategies positions Roblox Corporation (NYSE:RBLX) for continued growth in the dynamic gaming landscape. According to Insider Monkey’s Q2 2024 database, 54 hedge funds held stakes in Roblox Corporation (NYSE:RBLX) as of the second quarter.
2. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 63
Sea Limited (NYSE:SE), based in Singapore, is a leading technology conglomerate with a strong foothold in the esports industry through its gaming division, Garena. It is recognized as one of the most valuable esports companies globally, primarily due to its popular mobile game, Free Fire. This title has garnered immense popularity, making it one of the top mobile battle royale games worldwide.
The company not only develops and publishes games but also organizes esports events on a global scale. Sea Limited’s (NYSE:SE) Garena division hosts competitions ranging from local grassroots tournaments to major professional events. A highlight was the Free Fire World Series 2021 in Singapore, which set a record with 5.4 million concurrent viewers.
In its second quarter of 2024, Sea Limited (NYSE:SE) reported impressive growth in its gaming and digital entertainment segment. The company achieved over 20% year-on-year growth in bookings, largely driven by Free Fire’s success. Sea Limited (NYSE:SE) reported that Free Fire had more than 100 million daily active users throughout the second quarter of 2024. Additionally, Free Fire was recognized as the most downloaded mobile game worldwide in Q2 2024 according to Sensor Tower.
The company is also expanding its gaming portfolio with the upcoming launch of Need for Speed: Mobile in Taiwan, Hong Kong, and Macau, in collaboration with Tencent and Electronic Arts. This expansion aims to engage its dedicated gaming community further.
The company’s digital entertainment segment reported bookings of $537 million in Q2 2024, reflecting a 21% increase from the same quarter in the previous year. The total number of active users rose to 648 million, up 19% year-over-year, while paying users reached 52.5 million, marking a growth of 21.7%.
In addition to its gaming and entertainment division, Sea Limited (NYSE:SE) operates Shopee, one of the largest e-commerce platforms in Southeast Asia and Taiwan, and SeaMoney, which provides digital financial services. This diversified business model allows the company to reduce reliance on any single area while benefiting from multiple revenue streams across gaming, e-commerce, and finance.
Overall, Sea Limited (NYSE:SE) generated total revenues of $3.8 billion in Q2 2024, a 23% increase compared to Q2 2023. The company also reported a gross profit of $1.6 billion and had $9 billion in cash and investments as of June 30, indicating strong financial health.
According to Insider Monkey’s Q2 2024 database, 63 hedge funds held stakes in Sea Limited (NYSE:SE). It ranks second on our list of the best esports stocks to buy according to hedge funds. Artisan Partners stated the following regarding Sea Limited (NYSE:SE) in its “Artisan Developing World Fund” third quarter 2024 investor letter:
“Top contributors to performance for the quarter included Southeast Asian e-commerce leader Sea Limited (NYSE:SE). Sea rose due to an improved competitive environment in its Shopee e-commerce business that set the stage for commission increases, while a positive inflection in its gaming business surprised market participants.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is an American technology company that is mainly known for its software products like the Windows operating system. However, it is also a significant player in the esports market, largely due to its Xbox consoles and gaming services. A major factor that has enhanced the company’s standing in the esports industry was its acquisition of Activision Blizzard in October 2023, for approximately $69 billion. This acquisition brought popular franchises like Call of Duty, Warcraft, and Diablo under Microsoft’s umbrella, enhancing its gaming business across various platforms including mobile and cloud.
In its fiscal fourth quarter of 2024, Microsoft Corporation (NASDAQ:MSFT) reported impressive financial results, with total revenue reaching $64.7 billion, a 15% increase from the same quarter in the previous year. The gaming division experienced remarkable growth, with revenue rising by 44%, significantly boosted by the Activision Blizzard acquisition. Xbox content and services revenue increased by 61%, indicating strong support from the Activision Blizzard deal.
Microsoft also reported an operating income of $27.9 billion and a net income of $22 billion for the quarter, reflecting year-over-year increases of 15% and 10%, respectively. Notably, the corporation now boasts over 500 million monthly active users across its gaming platforms. Microsoft Corporation (NASDAQ:MSFT) also previewed a record 30 new titles during the quarter that ended June 30, 2024, including anticipated releases like Call of Duty: Black Ops 6 set to launch on Game Pass. This further demonstrates the company’s commitment to expanding its gaming portfolio.
On September 16, 2024, the company announced a quarterly dividend of $0.83 per share, marking a 10% increase from the prior quarter. The board of directors of Microsoft Corporation (NASDAQ:MSFT) also approved a share repurchase program allowing up to $60 billion in buybacks without an expiration date.
Overall, Microsoft Corporation’s (NASDAQ:MSFT) strategic moves in the gaming sector and strong financial performance position it as a compelling esports stock for investors looking to capitalize on the growing gaming market.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 279 hedge funds held stakes in Microsoft Corporation (NASDAQ:MSFT) as of June 30, 2024.
Overall, MSFT ranks first among the 8 best esports stocks to buy according to hedge funds. While we acknowledge the potential of esports companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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