Posts about Activision Blizzard
Has anyone spent time taking a close look at this company? I’m especially curious if anyone particularly loves/hates this at $67/share
Activision is the company behind Call of Duty, Warcraft, Diablo, Candy Crush, etc. I know they to have a very loyal customer following.
Over the past 6 months, the stock has traded down approximately 30% from $100/share. Given a history of +5-10% revenue growth, and over $3.5/share of cash flow, this seems potentially quite attractive
Reasons for the sell-off that I can see: 1) Sexual harassment lawsuit and claims of unequal gender pay; 2) delays around Overwatch and Diablo IV making for a lengthier period before the next revenue growth acceleration
$3.5 / $67 = +5% yield. Assuming no multiple expansion, 5-10% growth results in 10-15% IRRs on a multi year basis.
In terms of multiples, the company has treaded 20-30x cash flow historically. If the multiple improves from its current ~20x, that’s incremental return from there
Appreciate any and all thoughts, especially those who can make a good argument for why this is a terrible investment!
Hello everyone! I built a stocks website, and just released a section that provides research reports for specific stocks. I'm looking to expand this section if people find it useful. I released this Executive Summary on another stocks forum and thought maybe you all would like to read up about it.
If you'd like to read the entire article (I do recommend it because it has a lot of charts that will display some of the info, but it's a few pages long) you can visit the source here:
We believe that Activision Blizzards stock price has hit a point of being good value and with the most upside potential in the sub-$65 range. The company guided down on revenues last year based on the loss in popularity from some of their key franchises (WoW, Overwatch, COD). Combined with the flat outlook in the gaming industry as a whole and the stock price has seen a decline of almost 55% from peak to trough.
Rumors of Overwatch 2 and Diablo 4 are expected to be confirmed at this years BlizzCon 2019. Both Overwatch and Diablo are two of their billion-dollar franchises that have recently started to see a decline in user engagement. We expect these new launches to have a huge impact on revenues down the pipeline and provide revenue growth for several years post-launch.
Classic WoW has seen some incredible numbers and the possibility for continued revenue growth by maintaining user engagement through additional content.
COD Mobile was the most successful mobile game launch of all time (100 million downloads in first week) and broke all records, including recently released Mario Kart Tour (90 million downloads) and fellow competitors Fortnite and PubG. The game also provided 17.1m in revenues during opening week alone. The new COD Mobile can be looked at as a new revenue outlet, separate from its console counterpart in the Call Of Duty brand.
We expect the upcoming release Call Of Duty: Modern Warfare to be a big hit. The last 4 releases of Call Of Duty games earned 500m, 250m, 500m, 500m on their opening weekends, respectively. Using the positive hype from the open beta as well as the media attention from COD Mobile reaching 100m downloads in 1 week it wouldnt be unheard of to expect the new Modern Warfare to reach 750m sales on opening weekend, a 50% increase from last years game. Generally we see the success of a COD release followed by future successes down the road as the expectation from the publisher increases. It is only until a few consecutive less popular games are released that hype for the next release starts to decrease.
Our wildcard in this research is going to be Diablo Immortal, the most recent sequel in the Diablo hack and slash series designed strictly for play on mobile devices. Diablo Immortal was announced at last years Blizzcon 2018 with an expected 2019 release date, but as of yet none has been set. There was some backlash based on some of the gameplay footage not holding true to the classic diablo feel, but otherwise not much is known about this game. We expect a launch some time in 2020 (this is our estimation and opinion only).
Since recent news of Classic WoW and COD Mobiles successes the stock price has risen from $45 to just over $55. This leads me to believe that some of this good news is already priced in. However, an unknown variable that could propagate the stock price further is what lies ahead for these games. This unknown factor will rely on how well the management of Activision Blizzard is able to capitalize on this massive growth of user engagement from the recent successes of staple franchises. We believe the time is now for ATVI and give them a positive outlook.
Although COD Mobile and Diablo Immortal (when released) are already existing franchises this is the first time they are bringing them to mobile. The success of Fortnite, PubG, and the likes of those types of games has created a new era of mobile gaming. Therefore we see mobile versions of these games to be completely new revenue streams with unique DLC and content updates. A player who purchases DLC on COD Mobile will also have the potential for a sale on COD: Modern Warfare and vice-versa.
The recent political debacle could be a factor, but will be unknown how it will reflect on the company until the company reports some of the data. What we do know is that ATVI hasnt fully tapped the China market, and although they have upset a lot of gamers, they are siding with money over popularity and doing the right thing.
Short Term (0-2 Years)
New Overwatch 2 release*. *Not confirmed.
Additional WoW content.
COD Mobile DLC, additional content, and new releases.
COD: Modern Warfare expected massive launch will temporarily breathe life back into the Call Of Duty brand and give ATVI the opportunity to capitalize.
Long Term (2 Years +)
Regaining popularity of COD Mobile + Console games can lead to future successful launches.
Regaining popularity of WoW + additional content to maintain user engagement.
A successful Overwatch 2 release will lead to multiple years of revenue growth.
Diablo Mobile hit or miss has potential to be new revenue outlet.
Diablo 4, one of Activision Blizzards most successful franchises in the pipeline, should expect to see similar successes.
Classic WoW is able to maintain user-engagement of approximately 4m+ subscribers.
COD Mobile generates monthly revenues of 20-40m and *key point* is sustained until next release or added DLC.
COD Modern Warfare hits 750m+ sales opening weekend, restores faith in the Call Of Duty franchise.
Overwatch 2 + Diablo 4 announcement at BlizzCon 2019. King segment of revenues and MAUs is maintained by successful expansions/releases.
Classic WoW displays great subscriptions for the quarter, but expects a drop in subscriptions over subsequent quarters.
*COD Mobile shows hit numbers + revenues, but fails to maintain user-engagement in the long-term.
COD Modern Warfare brings in 500m revenues opening weekend, as such did their last 2 titles.
King segment shows slight decline in MAUs.
Classic WoW has sharp decline in subscriptions post-launch.
This demonstrates people were hyped to initially play the game, but it wasnt enough to keep players engaged long-term.
COD Mobile proves to be a poor revenue stream outside its first week launch (we already know it did 17.1m revenues first-week revenues).
King segment and one of their most stable segments over the last 2 years begins to see a decline as Candy Crush + expansions lose traction in the market.
BlizzCon 2019 doesnt announce anything note-worthy.
Political debacle has larger-than-expected effect on Activision Blizzards player-base.
I've been thinking about buying ATVI LEAPs. MSFT announced back in January their interest in buying out ATVI for $95/share. ATVI is currently trading at around $75/share. That $20 spread represents a pretty great opportunity IMO.
I understand that buyouts are not riskless opportunities (looking at you Musk/TWTR) but this one seems at least a bit more plausible. That $20 spread represents the risk involved (or at least the market's current assessment of it).
If I buy ATM LEAPs (thinking Jan '23 ATM calls) what are the downside risks? The only ones I can think of are:
Deal gets blocked by regulators,
Deal does not go thru before call option expiry.
What else am I missing here?
Edit: I wrote 'LEAPs' but TIL those have > 1 year until expiry. I guess I just mean long-dated calls.