NEW YORK (TheStreet) -- More people watched the finals of League of Legends, a competitive online role-playing video game, than watched the seventh game of the NBA finals, Jefferies analyst Mark Lipacis told investors as evidence of the exploding popularity of competitive video gaming, or eSports. The analyst believes the surging popularity of competitive video gaming on a global basis will benefit game publishers such as Activision Blizzard (ATVI - Get Report) as well as hardware companies like NVIDIA (NVDA - Get Report) .
$1B+ MARKET OPPORTUNITY: The audience of eSports fans is expected to grow 27% year-over-year in 2015 to 113M people, with another 147M people identified as "occasional viewers" who watch at least once per month. A recent study by Newzoo estimated that eSports could represent a market opportunity of over $500M by 2017, growing to more than $1B by 2020, Lipacis pointed out.
TWITCH: E-commerce giant Amazon (AMZN - Get Report) acquired Twitch, a video game streaming service, for close to $1B in August of last year. Twitch, which makes money selling ads, looks particularly well positioned as video ad budgets continue to shift online, according to Lipacis. Last month, Google's (GOOG - Get Report) YouTube launched its "YouTube Gaming" streaming site, which was developed after the search giant lost the bidding war with Amazon for Twitch. This morning, The Wall Street Journal reported that China's Tencent (TCEHY) is in talks to invest in Douyu TV, a Chinese game video streaming service similar to Twitch.
SOFTWARE: Noting that Activision Blizzard had five of the top fifteen most popular games on Twitch in July, Lipacis contends that the company looks best positioned among game makers to benefit from the eSports opportunity. The analyst, who calls the stock a "franchise pick" for the firm, believes estimates look conservative through 2016 for Activision, adding that Overwatch will be a key eSports title for the company. Other publicly traded companies in the video gaming space include game makers Electronic Arts (EA - Get Report) and Take-Two (TTWO - Get Report) and retailer GameStop (GME - Get Report) .
HARDWARE: Lipacis upgraded NVIDIA to Buy from Hold, saying secular growth in gaming will trump PC weakness. The company's Gaming Graphics Processing Unit is "under the radar" and has grown 23% annually over the past three years, Lipacis noted. NVIDIA also has exposure to autos and the cloud while its GPUs will be the processing engine for a new Virtual/Augmented reality products, according to Lipacis, who raised his price target for shares to $30 from $23.
PRICE ACTION: In early trading, NVIDIA rose 2% to $23.56 while Activision Blizzard gained 0.6% to $30.70.