Activision Blizzard: a growing opportunity for investors
ACcivision Blizzard (ATVI) stocks have continued to fall over the past several months and are currently trading at 52 week lows. Despite this, ATVI remains the most valued video game company in the United States, with a market cap of $ 48.6 billion.
I have already expressed my love for action because of the many positive qualities of the company. These include one of the most diverse portfolios of video game titles in the world, including iconic franchises like Call of Duty, World of Warcraft, and Candy Crush, which have always been cash cows. The business is also divided primarily into three segments, Activision, Blizzard and King, each focused on maximizing profitability based on their respective audiences and video game genres, thereby increasing the margin of safety for investors.
The action is currently under fire from criticism due to a sensitive report revealing that company CEO Bobby Kotick had known for years of incidents of sexual misconduct at ATVI, which he neglected to report. disclose to the board of directors. As a result, employees come out in protest and investors sell the shares.
While such news is, of course, one to be taken seriously and steps should be taken to restore employee confidence, from an investor perspective, the recent drop in equities likely presents an exciting opportunity. It is indeed likely that ATVI will continue to perform poorly in the short term. That said, the company is still gaining a ton of cash, and given its overall financials and valuation, the future bullish outlook looks too good to ignore. (See ATVI stock charts on TipRanks)
Loyal player base remains intact
As I mentioned, the recent allegations regarding the CEO of ATVI are certainly concerning, and it may be time for a CEO to step in. Operationally, however, the ATVI remains robust. This is evident in its strong player retention rates.
By far, Activision Blizzard’s biggest characteristic is its ability to maintain a very consistent player base among its titles. Usually, titles on the market tend to be played once, with no additional value for players and developers. In contrast, ATVI titles are able to maintain a strong player base for months, if not years, after launch.
A good example is the company’s transition from the Call of Duty franchise to a game-as-a-service model, which converted Activision’s monthly active user count (MAU) to a much more stable number after the third quarter of 2019. You can see its stats in the graph I’ve put together below.
Source: additional data, author
Indeed, the total number of MAU has recently decreased. However, this has happened in the past, and we should see the numbers pick up again after ATVI’s next game releases.
With the company expected to produce EPS of $ 3.81 for fiscal 2021, the shares are currently trading with a P / E of 16.88, making it a very attractive valuation in the space. Given ATVI’s high profitability and the possibility of taking advantage of the recent downturn to buy back stocks on the cheap, I remain optimistic about the stock’s investment record. Therefore, I remain bullish on the title.
The Taking of Wall Street
When it comes to Wall Street, Activision Blizzard has a moderate buy consensus rating, based on 12 buys, seven holds and zero sells awarded in the past three months. At $ 93.38, the ATVI average price target implies upside potential of 49.70%.
Disclosure: At the time of publication, Nikolaos Sismanis does not have a position in any of the titles mentioned in this article
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