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Online Gaming Is A $25.7 Billion Industry - Here Are The Frontrunners

By Faizan RazaStock MarketsMar 06, 2016 04:26AM ET
www.investing.com/analysis/online-gaming-represents-a-$25.7-billion-industry-200120545
Online Gaming Is A $25.7 Billion Industry - Here Are The Frontrunners
By Faizan Raza   |  Mar 06, 2016 04:26AM ET
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One of the hottest markets in 2016 is the online gaming industry. Whether it’s the ability of HTML5 to render content on increasingly diverse screens and hardware, or the popularity of micro-transactions, online gaming in 2016 is expected to generate $25.7 billion. That represents explosive year-over-year growth of more than 6% in an industry that isn’t even close to reaching its peak.

Electronic Arts / EA Games (NASDAQ:EA) Launches New Subscription Online Gaming Platform

One of the newest frontiers in online gaming is allowing consumers to subscribe to a gaming service in the same way that consumers have become used to video streaming with Netflix (NASDAQ:NFLX). Electronic Arts recently launched a supplement to their Origin digital game delivery service. Where previously gamers would purchase content on their Origin store and then download it using Origin’s digital delivery service, EA announced on January 12 that they would open up the platform to a subscription model.

On the day of the announcement, EA stock jumped to $65.62 from a previous close of $64.21. Since the announcement the stock has peaked at $70.83 on January 26, and then fell / rose dramatically, settling on $64.43 at close March 4. Current market cap for EA is $19.54 billion.

The major takeaway from the stock’s performance over this period is that, while exciting news that pushes the frontier of digital gaming is exciting and has a positive effect on a stock, it might be best to wait for the excitement to relax a little more before pulling the trigger on a buy order based on an online gaming press release.

King Digital Entertainment (KING) Showing 12.98% Increase in Short Activity

King Digital Entertainment (KING) is a major player in the mobile gaming arena. With games like Candy Crush, Bubble Witch and Farm Heroes reaching the top 10 listing in both Apple’s App Store and the Google (NASDAQ:GOOGL) Play Store, they are an undisputed powerhouse in micro-transaction inducing app development.

However, there may be trouble brewing, as there are reports of a 12.98% increase in short positions placed on the stock. Part of the challenge for a major player in the mobile space is the relatively low barrier to entry into the mobile gaming market. Anyone with a laptop and an internet connection can learn the basics of coding and then, through sheer grit and determination, develop their own app to be published through Apple’s and Google’s ecosystems.

888 Holdings PLC (888-GB) Enjoys Partnerships with the Major Nevada Casinos and Has Strong Corporate Discipline

The holy grail of online gaming is online gambling. While mobile app installs are exciting and ubiquitous, online gambling represents a massive market where adults can gamble their hard-earned money online. To some it’s a dirty industry, considering the stigma of gambling addiction, however that stigma hasn’t stopped many states in the US from passing new laws allowing for the legalization of online gambling (not that current laws are being vigorously enforced against online gambling sites).

Gambling sites based outside of the United States are constantly marketing themselves to US users. 888 Holdings PLC (LON:888) is traded on the London exchange and is legally based in Israel, operating under an incorporation in Gibraltar. Analysts have identified the stock as an exciting option compared to its peers, with no debt on the books and a track record of operating discipline. The company made headlines in the US for winning the race to partner with Ceasars Entertainment (NASDAQ:CZR) in 2011 as Nevada passed a law that legalized online gambling.

Online Gaming Is A $25.7 Billion Industry - Here Are The Frontrunners
 

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Online Gaming Is A $25.7 Billion Industry - Here Are The Frontrunners

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