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This Vertically Integrated Gaming Company Eyes The Massive Upside Potential of The Gen Z Emerging Economy

[vc_row][vc_column][vc_column_text]Today we’re going to highlight a company that is pounding the table on opportunities in the metaverse.  But first, what is the Metaverse? Welcome to the future. The Metaverse is where the internet is going, and it is having a breakthrough moment as we speak. Companies from all over the world are starting to buy in, and buy-in big.  Some of the largest tech players include Facebook – who recently changed their corporate name to Meta to emphasize this – Microsoft, and Nvidia all plan to develop metaverse platforms or the tools to help create them.  But it’s not just tech companies. Consumer companies like Chipotle, Verizon, and Nike are also buying in. There have already been some crazy results with companies buying virtual real estate. If you thought cryptocurrency and NFTs were big, Republic Realm, a company that invests and develops virtual real estate, bought a property in The Sandbox metaverse for a record $4.3 million in late November. That broke a record from Tokens.com who bought digital land for about $2.43 million mere weeks before A virtual yacht sold in the Sandbox for $650,000. And this could be just the beginning. Crypto asset management firm Grayscale thinks that the virtual Metaverse revenues could top $1 trillion annually So how do investors like you and I take advantage of this once-in-a-generation opportunity?  Yes, you could buy the major players. But if you want true upside, you need a company that is just getting going. You need a company that targets GenZ and Millennials. You need a company that is well versed in Crypto Gaming, GameFi, and the birth of the GenZ economy. You need Esports. You need to take advantage of the new social networking, especially of gamers who are more likely to adopt into the metaverse, not the aging Facebook and Instagrams of the world. The company you need in your portfolio is Enthusiast Gaming Holdings Inc. (NASDAQ:EGLX)(TSX: EGLX) Enthusiast Gaming is one of the largest vertically integrated gaming companies globally. It focuses on targeting Gen Z and eSports through media rights, marketing, advertising, and sponsorships.  At the core of the company’s mission, they connect everyone between publishers, broadcaster platforms, and fan communities.

Source: EGLX Investor Deck

Enthusiast CEO Adrian Montgomery summed up how genuinely astounding the company’s reach, engagement, and fan experience is to the Globe and Mail: “One out of every two American males between 18 and 34 visits an Enthusiast Gaming property every month, which is a pretty powerful statistic and a statistic a lot of traditional media companies would be envious of.”   Let that sink in.  Fifty percent of American males between 18 and 34 visit one of their spaces every MONTH. That is incredible reach and contact, and exactly what you’re looking for in a Metaverse play. The Metaverse will be where our digital selves are living and experiencing what we can only dream about today. The GenZ and Millennial demographic will be the most coveted audience to be able to begin to live their digital lives online in a virtual world we could have only dreamed about until now. Those who do not adopt the Metaverse will be left behind – kind of like in the early days of Facebook, where university students who didn’t have Facebook felt left out and disconnected from their friends.  Enthusiast Gaming already has a stranglehold on this demographic and is poised to take advantage of this generational shift.  With this virtual reality world, what do you think comes next? We expect there will be a lot of Crypto Gaming, Gamefi, and the birth of a new GenZ economy. We talked about the massive plots of land being sold, virtual yachts, and more happening. The new world economy for the Metaverse will be built by and for GenZ / millennial gamers to play, earn, and create the digital world. This is a Big Bang moment for Esports. And Enthusiast gaming is at the forefront. It might even be the future of traditional betting at this rate.  Remember when you had to go to a casino to place a bet? Those were some crazy days. Casino and gaming operators are already seeing the future, which will be a crossover of traditional sports betting to this new phase of esports betting. Esports and gaming companies are getting more coveted by new esports operators, starting to structure deals (like gaming team Faze and DraftKings), and it’s only a matter of time before the big bucks start rolling in.  What do these partnerships want?  Eyeballs. And Enthusiast Gaming Holdings (NASDAQ:EGLX)(TSX:EGLX) penetration in the GenZ and Millennial market is extremely enticing for advertising, as it has already shown in its recent financial performance. This company has over 300 million average MONTHLY gamers, 132 million esports social followers, 6 professional esports teams, and holds 50 global virtual and live events – with 12 million online views – including the largest gaming expo in Canada, and the largest B2B mobile game event in Europe.  This is the new evolution of social networking, and it’s coming from the most likely source of already-connected digital users: Gamers. The Metaverse is just an extension of what many GenZ and Millennials already know – you can have genuine engagement and connection with friends online. And what better way to pass the time than to be involved in a team, or against others in a friendly competition (or sometimes, not so friendly).  The best part?  You’re able to get this company at a discount right now. As of close on December 07, 2021, it was trading at the $3.60 level:     The price target of the analysts at RBC Securities? $12.00 USD. That represents some 170% upside from current levels. And that’s before we even take into consideration what the Metaverse could do to profitability.  How does the company turn a profit? Paid subscribers help. From their Q3 Management discussion and analysis, they more than tripled their paid subs from 61,000 in March 2019 to approximately 207,000 in September 2021.  Revenues have been cruising as well. For the three-month period ending September 30, 2021, they pulled in over $43 million, compared to over $16 million in 2020 – a 165% increase. It’s even better when you look at the nine-month period ending on that same date, as they pulled in over $110 million compared to the $30.4 million in September 2020. That’s a 262% increase and shows some major growth trends.  These blowout financial results for the three and nine months ended Sept 30, 2021, include more highlights:
  • Record revenue of $43.3 million, including direct sales of $6.8 million
  • Record gross profit of $10.1 million
  • Paid subscribers reaching an all-time high of 207,000
  • Direct sales of $6.8 million, a 580% increase vs. direct sales of $1.0 million in Q3 2020
  • Gross profit of $10.1 million, a 146% increase vs. gross profit of $4.1 million in Q3 2020
  • Paid subscribers of 207,000 as of Sept 30, 2021, an 85% increase vs. paid subscribers of 112,000 as of Sept 30, 2020
  • Cash balance of $33.5 million as of Sept 30, 2021, as compared to $4.3 million as of Dec 31, 2020
In addition to owning Luminosity Gaming, the #1 most popular esports organization on Twitch (a company that made an estimated $2.3 billion in revenue in 2020), Enthusiast Gaming has been in acquisition mode lately. On Nov 23, 2021, Enthusiast announced its $44 million acquisition of Outplayed. Outplayed owns League of Legends fan community U.GG, one of the world’s largest League of Legends fan communities and stats sites. Forecasts show that this arrangement could pay an additional $12 million under an earnout agreement over two years. Additionally, U.GG is also expected to generate approximately $8 million in revenue and net operating income of roughly $3 million in 2022.  This deal also comes on the heels of Enthusiast’s acquisition of casual game publisher Addicting Games for a cool $35 million.  If you need more convincing, analyst price targets, in general, are extremely optimistic on the outlook here. From WSJ.com, analysts are showing:
  • 9 “Buy” opinions with 0 “Hold” and 0 “Sell” opinions
  • A Stock Price Target High of $12.00
  • A Stock Price Target Median of $9.50
  • A Stock Price Target Low of $8.00
  • A Stock Price Target Average of $9.81
Enthusiast Gaming Holdings (NASDAQ:EGLX)(TSX:EGLX) has the ecosystem and growth possibilities to take advantage of this Metaverse shift. We encourage you to read through the company’s recent financial reports and management discussion & analysis to get better insight to the future. Their investor presentation is also a useful document to get further research.  The company’s Nov. 10, 2021 Q3 MD&A can be found here: https://www.investorx.ca/doc/2111101322222274 The company’s Nov. 10, 2021 Q3 Interim Financial Statements can be found here: https://www.investorx.ca/doc/2111101321003524 If you want to get ahead of the game on the real money to be made in the Metaverse, this is the company. This is the opportunity. Get in before the rest of the market realizes what a generational play this could be.   

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