Skip to main content
Complete Olympic Games coverage at your fingertips
Your inside track on the Olympic Games
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Complete Olympic Games coverage at your fingertips
Your inside track onthe Olympics Games
$1.99
per week
for 24 weeks
// //

On today’s Breakouts report, there are just seven stocks on the positive breakouts list (stocks with positive price momentum), and 146 stocks are on the negative breakouts list (stocks with negative price momentum). When the number of stocks on a negative breakouts list is unusually high, this often signals a bottom is nearing in the stock market.

Discussed today is a stock that appeared on the negative breakouts list on Monday – Enthusiast Gaming Holdings Inc. (EGLX-T). On Monday, the stock continued to slide and briefly entered oversold territory before the share price snapped back and closed the day with a 2.4 per cent gain.

Since April, the share price has declined 46 per cent. Despite this sharp move lower, the stock has rallied 30 per cent year-to-date. The share price may have already put in a bottom, or be close to doing so. The stock has a unanimous buy recommendation from seven analysts. The average target price suggests that the share price may rise 109 per cent over the next year.

Story continues below advertisement

A brief outline on Enthusiast Gaming is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.

The company

Toronto-based Enthusiast Gaming has web and video platforms that people can visit and see video game and esports content. The company has an audience of over 300-million monthly active viewers, comprised mainly of zoomers (Generation Z) and millennials who are between 18 and 35 years old.

The company has three main reporting segments. In 2020, the company’s revenue breakdown was 83.5 per cent from media and content, 8.5 per cent from subscriptions, and 8 per cent from esports and entertainment. Its largest segment, media and content, has more than 100 gaming websites containing content such as video game live streaming, gaming reviews, chats, videos, and message boards. Its web platform has more than two billion page views each quarter, and the company’s video platform has more than seven billion views each quarter. The company earns revenue from ads placed on these platforms.

There is seasonality in the company’s operations with the first quarter typically the weakest and the fourth quarter typically the strongest due to the nature of the digital advertising market.

The stock trades on the Toronto Stock Exchange and the Nasdaq under the same ticker, EGLX. In April, the stock began trading on the Nasdaq – a milestone for the company.

Quarterly earnings results

After the market closed on May 12, the company reported its first-quarter financial results. Revenue was $30-million, up from $7.1-million reported during the same period last year, driven by acquisition growth. Reported revenue was in-line with the Street’s forecast. Gross profit came in at $5.9-million (gross profit margin of 19.7 per cent), up from $3.3-million (gross profit margin of 46 per cent) reported last year. Its gross profit margin was negatively impacted from the acquisition of Omnia Media Inc., which was completed on Aug. 31, 2020 (Los Angeles-based Omnia offered Enthusiast Gaming a YouTube video gaming network with over 3.2 billion monthly video views). Management believes the gross profit margin will increased back to historical levels over time. At the end of the first-quarter, paid subscribers totaled 137,000, up from 92,000 reported last year. On the earnings call, management indicated that its paid subscribers expanded to 145,000 as of May 13.

Investment thesis

  • Unique Canadian growth stock operating in the video game industry. Management guided to 20 per cent revenue growth in 2021.
  • Organic, or internal, growth. Expected to be achieved by increasing direct sales (higher revenue compared to programmatic advertising), expanding its paid subscriber base (provides recurring revenue), reducing churn by shifted subscriptions to annual subscriptions instead of monthly subscriptions, higher advertising rates, and Project GG that will be launched later this year with enhanced subscriptions offered on this platform.
  • Acquisition growth. For instance, adding more video game communities.
  • Significant insider ownership. Insiders own approximately 24 per cent of the common shares outstanding, aligning their interests with those of its shareholders.
  • Potential catalyst: The Street anticipates the company will report positive EBITDA (earnings before interest, taxes, depreciation and amortization) in 2022.
  • Risks to be aware of: 1) Frequent financings to fund its growth. In Feb., the company completed a $58.7-million bought deal financing, issuing shares at a price of $5.75 per share. In June, the company completed a US$46-million financing, issuing shares at a price of US$5.75 per share. 2) Foreign exchange. Most of the company’s revenue is in U.S. dollars but the company’s financial results are reported in Canadian dollars.

Dividend policy

Management is focused on retaining capital to fund the company’s growth. Consequently, the company does not pay its shareholders a dividend.

Story continues below advertisement

Analysts’ recommendations

This small-cap stock has a unanimous “buy” recommendation from seven analysts.

North American firms providing research covering on the company are: Alliance Global Partners, B. Riley, Canaccord Genuity, Colliers Securities, Haywood Securities, HC Wainwright & Co., and Paradigm Capital.

Revised recommendations

In June, one analyst revised his target price. Canaccord’s Robert Young trimmed his target price to $11.50 from $12.

Financial forecasts

The consensus revenue estimates are $158-million in 2021, up from $73-million reported in 2020 (pro forma $127.6-million), and expected to rise to $199-million in 2022. The Street is anticipating Enthusiast Gaming to report positive EBITDA next year. The consensus EBITDA estimates are a loss of $10-million in 2021 and positive $3.2-million in 2022.

Top line forecasts have been rising. To illustrate, four months ago, the consensus revenue estimates were $151-million for 2021 and $179-million for 2022.

On the fourth-quarter earnings call held in March, chief financial officer Alex Macdonald stated that he expects revenue to increase 20 per cent in 2021 compared to 2020 pro forma revenue of $127.6-million, implying revenue of $153-million in 2021.

Story continues below advertisement

Valuation

According to Refinitiv, the stock is trading at an enterprise value-to-sales multiple of 3.7 times the 2022 consensus estimate.

The average 12-month target price is $12.26, implying the stock price will more than double with 109 per cent upside potential over the next 12 months.

Insider transaction history

Year-to-date, there has not been any trading activity in the public market reported by insiders.

Chart watch

Year-to-date, the share price is up 30 per cent. Between Nov. 2020 and April 2021, the share price was in an uptrend. On April 20, the stock price closed at a record high of $10.87. However, since then the share price has plunged 46 per cent, closing at $5.87 on July 19.

On July 19, the stock briefly entered oversold territory when the relative strength index (RSI) declined to 30. Generally, an RSI reading at or below 30 reflects an oversold condition. That day, the share price opened in negative territory, trading at a low of $5.43, before recovering to close the day with a 2.4 per cent gain.

In terms of key technical resistance and support levels, the stock price has a ceiling of resistance around $8, and major resistance between $10 and $11. Looking at the downside, the share price has strong technical support around $5.50.

Story continues below advertisement

POSITIVE BREAKOUTSJuly 19 close
AND-TAndlauer Healthcare Group Inc. $40.77
EXF-TEXFO Inc $7.56
GDI-TGDI Integrated Facility Services Inc. $59.50
GWR-TGlobal Water Resources Inc. $22.18
L-TLoblaw Cos Ltd $80.50
ML-XMillennial Lithium Corp. $3.45
TC-TTucows Inc. $104.26
NEGATIVE BREAKOUTS
VNP-T5N Plus Inc $2.58
RZZ-XAbitibi Royalties Inc. $22.80
ADN-TAcadian Timber Corp $17.95
AC-TAir Canada $23.44
CLIQ-TAlcanna Inc. $6.41
AXU-TAlexco Resource Corp. $2.58
ALS-TAltius Minerals Corp $15.90
ARR-TAltius Renewable Royalties Corp. $8.65
USA-TAmericas Silver Corp $1.68
ADW-A-TAndrew Peller Ltd $9.00
ASM-TAvino Silver & Gold Mines Ltd. $1.26
BDGI-TBadger Infrastruture Solution $32.96
BNS-TBank of Nova Scotia $76.77
BDT-TBird Construction Inc $8.25
BDI-TBlack Diamond Group Ltd $3.80
BRAG-TBragg Gaming Group Inc. $10.67
BRE-TBridgemarq Real Estate Services $16.48
BU-TBurcon NutraScience Corp $2.99
CAE-TCAE Inc $34.70
CNE-TCanacol Energy Ltd $3.19
CTC-A-TCanadian Tire Corp Ltd $186.59
CWB-TCanadian Western Bank $32.94
CFP-TCanfor Corp $23.34
CFX-TCanfor Pulp Products Inc $7.15
CRDL-TCardiol Therapeutics Inc. $2.60
CCL-B-TCCL Industries Inc $66.93
CLS-TCelestica Inc $9.00
CERV-TCervus Equipment Corp $13.65
CEU-TCES Energy Solutions Corp. $1.56
CHE-U-TChemtrade Logistics Income Fund $6.31
CKG-XChesapeake Gold Corp. $3.83
CHR-TChorus Aviation Inc $4.23
CMG-TComputer Modelling Group Ltd $4.44
CMMC-TCopper Mountain Mining Corp $3.10
CPG-TCrescent Point Energy Corp $4.05
CURA-CNCuraleaf Holdings Inc. $16.11
DML-TDenison Mines Corp $1.18
DSV-XDiscovery Silver Corp. $1.72
DPM-TDundee Precious Metals Inc $7.31
ELD-TEldorado Gold Corp $11.66
EFL-TElectrovaya Inc. $0.96
EMX-XEMX Royalty Corp. $3.55
EDR-TEndeavour Silver Corp $6.06
EFX-TEnerflex Ltd $7.20
EFR-TEnergy Fuels Inc $5.85
EQX-TEquinox Gold Corp. $7.88
ERO-TEro Copper Corp. $23.34
ET-TEvertz Technologies Ltd $13.80
FAF-TFire & Flower Holdings Corp. $0.94
FR-TFirst Majestic Silver Corp $15.93
FN-TFirst National Financial Corp $48.51
FM-TFirst Quantum Minerals Ltd $23.12
FVI-TFortuna Silver Mines Inc $5.85
FURY-TFury Gold Mines Limited $1.29
GLXY-TGalaxy Digital Holdings Ltd. $15.17
GAU-TGaliano Gold Inc. $1.20
GIL-TGildan Activewear Inc $41.49
GLO-TGlobal Atomic Corp. $2.37
GSC-TGolden Star Resources Ltd. $2.87
GOLD-TGoldMining Inc. $1.56
GCM-TGran Colombia Gold Corp. $4.57
GBR-XGreat Bear Resources Ltd. $13.28
GPR-TGreat Panther Silver Ltd $0.71
HWX-THeadwater Exploration Inc. $3.53
HEXO-THEXO Corp. $5.36
HIVE-XHIVE Blockchain Technologies Ltd. $2.54
IAG-TiA Financial Corporation Inc. $64.47
IMG-TIAMGOLD Corp $3.46
IBG-TIBI Group Inc. $10.02
IGM-TIGM Financial Inc $42.64
III-TImperial Metals Corp $4.08
IMO-TImperial Oil Ltd $33.41
IMV-TIMV Inc. $1.72
IFP-TInterfor Corp $24.37
ITP-TIntertape Polymer Group Inc $26.40
IVQ-U-TInvesque Inc. $2.56
JAG-TJaguar Mining Inc. $4.97
KSI-Xkneat.com Inc. $2.81
GUD-TKnight Therapeutics Inc $5.11
LAS-A-TLassonde Industries Inc $170.11
LB-TLaurentian Bank of Canada $41.66
LEAF-TLeaf Mobile Inc. $0.27
LGD-TLiberty Gold Corp. $1.21
LNR-TLinamar Corp $70.76
LUC-TLucara Diamond Corp $0.72
LUG-TLundin Gold Inc $9.82
MG-TMagna International Inc $105.26
MFC-TManulife Financial Corp $23.54
MRE-TMartinrea International Inc $11.98
MMX-TMaverix Metals Inc. $6.13
MKP-TMCAN Mortgage Corp $17.04
MUX-TMcEwen Mining Inc. $1.43
MDNA-TMedicenna Therapeutics Corp. $3.22
LEAF-TMedReleaf Corp. $0.27
MTA-XMetalla Royalty & Streaming Limited $9.75
MX-TMethanex Corp $39.59
MOGO-TMogo Inc. $7.02
TPX-B-TMolson Coors Canada Inc. $64.00
NEPT-TNeptune Wellness Solutions Inc. $0.93
NCU-TNevada Copper Corp $0.18
NGD-TNew Gold Inc $2.00
NUAG-TNew Pacific Metals Corp. $4.66
NXE-TNexGen Energy Ltd. $4.52
NDM-TNorthern Dynasty Minerals Ltd. $0.49
NOU-XNouveau Monde Graphite Inc. $8.22
NG-TNovagold Resources Inc $9.75
NVO-TNovo Resources Corp. $1.94
OLA-TOrla Mining Ltd. $4.31
PAAS-TPan American Silver Corp $33.39
PSI-TPason Systems Inc $7.81
PBL-TPollard Banknote Ltd. $48.09
PRN-TProfound Medical Corp. $19.29
PGM-XPure Gold Mining Inc. $1.10
PYR-TPyroGenesis Canada Inc. $4.72
RFP-TResolute Forest Products Inc. $13.69
QSR-TRestaurant Brands International Inc $78.38
STC-XSangoma Technologies Corp. $2.71
SAP-TSaputo Inc $36.04
SCL-TShawCor Ltd $5.00
SMT-TSierra Metals Inc $3.58
SVM-TSilvercorp Metals Inc $5.99
SIL-TSilverCrest Metals Inc. $9.14
SII-TSprott Inc $45.07
SJ-TStella-Jones Inc $42.11
SU-TSuncor Energy Inc $25.38
TVE-TTamarack Valley Energy Ltd. $2.09
TKO-TTaseko Mines Ltd $2.08
TER-CNTerrAscend Corp. $11.10
TH-TTheratechnologies Inc $4.19
TXG-TTorex Gold Resources Inc $13.38
TD-TToronto-Dominion Bank $81.81
TMQ-TTrilogy Metals Inc. $2.65
TFPM-TTriple Flag Precious Metals Corp. $14.16
TUD-XTudor Gold Corp. $2.27
TRQ-TTurquoise Hill Resources Ltd $16.45
VLNS-TValens Company Inc. $2.27
VET-TVermilion Energy Inc $8.36
VMD-TViemed Healthcare Inc. $8.29
VYGR-CNVoyager Digital Ltd. $14.23
WM-TWallbridge Mining Company Limited $0.48
WE-XWeCommerce Holdings Ltd. $11.72
WED-XWestaim Corp. $2.52
WEF-TWestern Forest Products Inc $1.88
WPRT-TWestport Fuel Systems Inc. $4.88
WCP-TWhitecap Resources Inc $5.29
WPK-TWinpak Ltd. $37.60

Source: Bloomberg and The Globe and Mail

Please note that this report is not an investment recommendation.

The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.

If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.

Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies