Activision Blizzard, Esports, Blizzard Entertainment, Media Stock Analysis: Activison Blizzard (ATVI) Price Prediction- February 2021
My name is shawn and today we’re talking all things, activision blizzard, ticker, symbol, atvi, so let’s get it the layout for this. Video is gon na go as follows: part one is gon na be company overview part two of the financials part, three, the valuations part. Four. My investment in activision blizzard and part five, my end of the year price target so part one company overview, so starting off. If you’ve never heard of activision blizzard they’re an american video game holding company based in santa monica california, they create the most epic interactive gaming and entertainment experiences on earth, immersing players in new unimagined worlds. Our products help build communities and create social platforms that bring people together. We are relentlessly curious, pushing the boundaries of what is possible to create games of our dreams and yours, so activision is comprised of three main video game makers, activision, blizzard entertainment and king digital, which have a combined 400 million monthly, active users in 2020 and their route To reach a billion people as they apply their call of duty framework across all their other franchises, so that will include premium content free to play. Access to all consumers, which i mean don’t, threaten me with a good time also expansion to mobile and continuous, regular delivery of in game content, so starting off with activision. They have popular games like call of duty spyro crash bandicoot call of duty is obviously the biggest one here and it’s growing like crazy.
They have over 128 million monthly active users and unit sales grow 40 percent year over year year. Over year, in q4, monthly active users grew approximately. Seventy percent and time spent playing call of duty more than doubled, call of duty in game net bookings on console and pc grew more than fifty percent year over year, while the first season of content that is still underway has seen the highest number of battle passes, Consumed since the introduction of the system in late 2019., the call of duty league kicked off its uh newest season on february 11th. So, just a couple days ago, fans will get to enjoy even more large scale competitive play this season as its 12 city based teams compete in new tournament style format in the black ops, cold war era. Moving on to blizzard blizzard entertainment has popular games like world of warcraft overwatch diablo hearthstone blizzard has monthly active users of 29 million classic and modern modes drove full year world of warcraft net bookings, growth of over 40 percent highest level in nearly a decade, which is Good to see that world of warcraft is still growing at those kind of rates, they also recently released diablo immortal for mobile and say that it was met with positive feedback and strong engagement, metrics, which is again also really nice to see. Overwatch is also seeing good engagement and the overwatch league is starting its new season this april and, lastly, a little overview of king digital.
So this one has a crazy amount of monthly active users coming in at 240 million in game net bookings grew by double digit percentages year over year for king candy crush specifically, was once again the top grossing franchise in the united states. App stores, king is also launching crash bandicoot on the run, and that is to launch in march, and i personally love the crash. Bandicoot franchise so i’ll be downloading that for sure and i’m sure it’ll also be met with a lot of positive feedback and a lot of downloads there’s, so many games, but i just wanted to focus on the popular ones. For the sake of not making this video go on forever, i mean i could go into detail and rank my favorite call of duty games from best to worst, but i’ll save that for another time, for you guys, according to statista, the video game market alone is Going to be worth over 200 billion in 2023 and it’s, seeing good constant growth year over year, the esports market in general is also climbing and that’s going to reach 1.6 billion in 2023, and you can bet that that will only get larger and larger as well. The growth of esports provides several ways for activision blizzard to make money, so the main sources of revenue are advertising sponsorship, team sales, sales of media rights, merchandise and tickets of those. The two biggest components right now are advertising and sponsorship, and activision blizzard has attracted its share of top consumer brands to sponsor games like call of duty and overwatch, because they have such large followings.
Something i found interesting while researching more into activision blizzard, is that the average gamer in 2012 was about 30 years old, and now the average gamer is between 35 and 44.. I personally think that’s awesome to see, because i don’t see myself ever not playing video games. It’S just it’s a part of my life and it’s, something that i mean i don’t play as much as i did as a kid, but i still love to do it when i have the time and that’s also just massive, because people between 35 and 44 will Typically, have more money, so they can spend more money on games or in game content. But now that we have a little overview of activision blizzard and the market they compete in let’s move into the financials so moving into their financials. They came in with better than expected results in their last quarter, so q4 gap, revenues of 2.41 billion versus their outlook of 2 billion, so 410 million more, is quite the beat they had q4 gaap, eps of 65 cents versus an outlook of 44 cents and a Non gaap basis, 76 cents versus an outlook of 63 cents. The company came in at 8.086 billion for net revenues in 2020 and eps came in at two dollars and 82 cents, which was up almost a full dollar from 2019.. Free cash flow also grew nicely. So all around it was a great earnings report. So yeah revenues grew a massive 25 operating income, increased 70 and earnings per share increased 45, so they killed it in 2020.
. You can see in q4. Activision definitely takes the w bringing in the most amount of revenue with 1.65 billion. Blizzard comes in second just beating out king by about 2 million, but those two are pretty even now. Their guidance and outlook actually doesn’t look too attractive. In my opinion, activision blizzard is only forecasting 8.225 billion, so only up less than 200 million from this year, which is pretty low but that’s just their forecast for revenue. They’Re also only forecasting 2.83 of eps, which is literally only one cent higher than what they came in this year. They have a solid balance sheet with cash expected to grow this year, but with gross debt. Staying the same so the company’s in a good position with more than double the cash to gross debt, which is always nice to see so moving into valuations right now, activision trades for just over 100 us dollars and has a market cap of 80 billion. They have a pe ratio of 36 and a 4p of 24.. They trade around 10 times revenue, so nothing crazy, especially like what you see in the market nowadays and they even pay a little bit of a small dividend at 0.46. If we compare that to their competition like electronic arts, they have a market cap of about 40 billion. They have a trailing pe of also 36, a 4p of also 24, and their price and sales is a little bit less coming in about 7.
5. So i mean compared to their competition they’re pretty much valued just equally, but moving into part four, my position in activision blizzard. So this is the one position that i’ve actually shown because in one of my first videos, where i actually did a walkthrough of how to buy stocks on questrade, i showed my position, so you guys can literally see here what i am invested in activision blizzard now. I originally bought the stock around 40 in late 2018 and early 2019, but when i transferred my account to questrade, it didn’t count my original price of the stock that i bought it at. It marked it as what the stock was trading at at the time that i transferred the accounts, so the average cost here is a little bit more than what i actually paid for, but all good. So i honestly got started in activision blizzard because when i first started investing, i thought of companies that i truly loved – and this was one of the first ones that popped into my inexperienced head. I had no idea what i was doing back then, but i saw the stock drop a lot and i knew how much i loved video games and i’m sure other people did too, and i have a little brother that literally plays call of duty all day. So i knew the franchise was growing and i just decided to make a position and go for it. Regrettably, i did sell about half my position, so you can see that i did book in some profits here in early 2020, but that money went into tesla and that did quite well for me, so i can’t really complain there.
I love the diversity that activision gives me in my portfolio and i believe esports is going to be a bigger industry than analysts are even predicting, so activision blizzard will benefit greatly from that right now i hold this stock because i think it realistically can grow about 15 to 20 percent every year, so you can see here that it stays around a 30 p e ratio for the most part. So next year let’s say the company comes in at three dollars of eps compared to the two dollars and 83 cents. They forecast, because i think they’re going to beat expectations with covets still going on and people continuing to play more video games. I really think that’s possible, so if that’s the case – and we take three dollars of eps – give them a p e ratio of 30 that would bring the stock to only 90, which is actually down from where they are today. If we give the stock price a multiple of 36, like where they’re trading at now, that only brings the stock price to 108, which is only a four dollar increase in the next year. So not very much, however, if we trade atvi of non gaap eps, i think it’ll come in around four dollars in 2021 and therefore a p e ratio of 30 on that would bring the stock price to 120 and a 36 p e ratio on that would Bring the stock price to 144, so a lot more upside.
If we take the low of ninety dollars and the high of 144 and divide that by two we get a nice even 117. So that’s going to be my guess for the end of next year, is that activision trades at 117 by the end of this year, all in all activision isn’t, a massive part of my portfolio and i’m happy just where i am with the stock right now, and I don’t think i’m going to be selling or buying any more anytime soon. For me to want to buy the stock, it would have to drop under 90 if it’s below 90. I just see a lot more upside than downside and at that point it’s a lot more attractive to me, but hey i’m, no financial, analyst i’m, just some person on youtube just voicing his opinion about a childhood video game stock that he loved but anyways. That was my stock analysis on activision blizzard. Please let me know your thoughts and where you see the stock going in the future, and maybe give me your end of the year price target now, if you’re still here. Thank you so much for watching the video please like subscribe, hit that little bell notification button.