Investing in Activision Blizzard - Best Gaming Stock under $100?

A little bit about Activision

Founded in 2008 as an interactive entertainment company. Activision develops interactive software products and entertainment content for PC, gaming consoles, and mobile platforms, such as Google’s Android and Apple’s iOS.

In a nutshell, a video games company, mostly know for its biggest game success like War of Warcraft, Call of Duty, Tony Hawks, Diablo, and Crash.

After the merge of Activision and Blizzard in 2008, their stock has been soaring to the upsides. Started at $15 per share, with an all-time high of $104.53. And as for today holding the $80 area.

Market opportunity

The Gaming industry is considered to be one of the fastest-growing industries on the planet, online gaming has exploded over the years.

Just a decade ago, the gaming industry was bringing in less than $60 Billion in revenue, and now we are forecasting over $200 billion in revenue by 2023.

Look at the revenues percentages per gaming segment and how each one of them offers a big opportunity for any gaming company.

The attractiveness of Activision is that it owns one of the most popular games of all time; Call of Duty.

COD is one of the most popular games for PC and Console gaming and a Mobile Game gem with over 50,000,000 downloads in the Play Store and App Store.

Activision has been able to profit from each segment of the gaming industry, and by a lot.

King.com

They are also King's parent company, the developer and publisher of Candy Crush, considered one of the most financially successful games utilizing the freemium model. King was acquired by Activision Blizzard in February 2016 for US$5.9 billion and operates as its own entity within that company.

As for today King has developed and published more than 200 other games. And has been generating Billions since it was acquired.

• 2016 — $1.58B
• 2017 — $1.99B
• 2018 — $2.08B
• 2019 — $2.03B
• 2020 — $2.16B

Let's talk money…

This post is all about if Activision is a buy or not. Looking at the game industry and the company path since its creation we can only highlight good things.

The next step is looking at the financial statements and how they manage the inside.

Financial statements

I am always most interested in knowing how much they make, how much they keep, and how much they owe.

From 2017 to 2020 Revenue increased 13%.

Total Sales has been increasing greatly over the years. They did have a big drop in sales in 2019, but they did recover 2x what they lose the year after.

The cost of revenue has been steady without increasing too much.

Total Assets went from 17B to 23B in 5 years.

Currently holding +2.17 B in free cash flow, a nice increase from the +1.8B free cash flow of 2020.

Financial statement Conclusion:

From 2017 — Today

• Total Assets = +80%
• Total debt = +50%
• Total Revenue = +78%

Financially I do think they can do it better. They have been all over the place with not the best consistency. I would rather see slow and steady growth, than crazy growth and unpredictable revenue or debt for the next years to come.

The valuations and verdict

Activision Blizzard trades at 22 times forward earnings and less than nine times this year’s sales.

Revenue increase for the next 5 years is estimated to be 10–15% per annum. If they continue improving their mobile game community and publishing good series of content I think it’s possible.

The dividend yield is at 0.56% with the last payment of 0.46 cents per share, with a dividend increase year over year.

They has been beating earnings quarter after quarter, with the ability to maintain debt and cost of revenue low.

Long term future looks bright, with Call of Duty mobile being one of the most played mobile games from 2020–2021, and now preparing to launch Diablo 2 to mobile version.

The average analyst rating is a Buy, with an average target of $116. If you buy it today at $83, there’s a 29% opportunity growth.

Overall Activision Blizzard is a great company with great assets and a story. They have been one of the leaders of the gaming industry for decades, and I am sure they will continue to be.

They will continue to cash flow positively for years to come just from the games they have published. If you combine that with innovation and future great games you have a killer stock pick.

Stock-wise, it is sitting at a good price. May look for greater buying opportunity between the $73–76 area.

Disclaimer: This is not financial advice, I am just a guy with a laptop sharing his opinions and experience. This is for entertainment purposes only. Always Do your own research before investing.