For 2020, I expect 5G, the streaming wars, cloud computing and software-as-a-service companies to dominate the conversation -- but my focus will be on the continued explosion in eSports.
The total addressable market for eSports can differ by a large margin, depending on who you ask and what statistics you want to base your final answer on. So, it is best to approach the topic with a range in mind. We already know it is a new billion-dollar industry, but I expect that range to increase by 50% to 100% over the next three years, landing it in the range of $1.5 billion to $2 billion for the market.
For perspective, roughly 100 million people will watch the Super Bowl a month from now. The number who watch at least six minutes of the game will be closer to 150 million. Depending on the match-up, those numbers could be higher or lower by as much as 10%, but over the past few years, we've actually seen a decline in viewership, putting this year's expectations in proximity to a decade ago. There's been little-to-no growth.
But eSports is expected to reach 650 million viewers in the next few years, which will double its size in only six years. Amazon's ( AMZN) Twitch and YouTube Gaming ( GOOGL) , the most well-known streaming platforms in the U.S., are driving live-streaming and gaming platforms. Both are open internationally, and neither stands without additional competition from names like Microsoft's ( MSFT) Mixer, Steam, and Smashcast to name a few.
But I want to turn my attention internationally.
The Asia-Pacific region is the top eSports market in the world, accounting for more than half of global viewership in 2019. Latin America is one of the fastest growing regions -- expected to double in only four years, which is 50% faster than worldwide growth forecasts. But it is still a much smaller market that the Asia-Pacific region, which is not expected to lose its dominance any time soon.
Although I'm not focused on 5G here, its development will have an impact on gaming. In fact, the biggest benefactor to 5G may be eSports. Already mobile gaming makes up 45% of the total global games market. When 5G becomes widespread, expect the quality of both gaming and streaming to increase dramatically for 5G users. I don't believe that impact is fully baked into current eSports growth numbers.
I believe an investor could go with a trio of names, including Huya ( HUYA) , Bilibili ( BILI) , and Sea ( SE) -- the latter seeking to take advantage of both the Asia-Pacific region and growth in Latin America. Sea had a great run in 2019, so for 2020, I'm keying on Huya.
Huya's reported revenue of $316.9 million on growth of 77.4% in its most recent quarter. Roughly 95% of revenue came from streaming with 5% from advertising. Net income rose 117% to $17.2 million, and the company is already profitable, unlike many smaller names in the space. It carries a market cap around $4 billion, and it has $1.33 billion in cash on its book against no debt, and remember, it's profitable.
A key metric for Huya is its massive user base. It boasts 146 million monthly average users, up 47.6% year-over-year with 63.8 million on mobile. That's an eye popping 14.1% quarter-over-quarter growth on mobile monthly average users. The strongest metrics may be the 660,000 streamers that have helped the company grow its total paying base numbers to 5.3 million, a 28.5% year-over-year bump.
While I believe the best approach is to buy a portfolio of five names in the sector, it if I had to start with a single name for 2020, it would be HUYA, given its strong balance sheet, profitability, and stronghold in the biggest eSports market in the world.
(AMZN, GOOGL and MSFT are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells them? Learn more now.)
