Activision Blizzard, Inc. is an iconic American video game company with headquarters in Santa Monica, California. The company is the result of the merger between the publicly traded Activision Publishing (Activision, Inc.) and Vivendi Games in 2008.
The company trades on the Nasdaq stock exchange under the ticker symbol $ATVI, and it’s been a member of the S&P 500 stock index since 2015. Activision Blizzard operates using five divisions in its business model.
Blizzard Entertainment, Activision Publishing, Activision Blizzard Studios, and King, Major League Gaming. The company also operates several subsidiaries, which fall under the umbrella of Activision Publishing. These divisions include Infinity Ward, High Moon Studios, Treyarch, and Toys for Bob.
Activision Blizzard is responsible for developing, publishing, and distributing some of the most popular video game console titles.
Previous successes include the Call of Duty, Guitar Hero, and Crash Bandicoot franchises. The company is also responsible for the highly successful Tony Hawk franchise, as well as Spyro, World of Warcraft, Skylanders, StarCraft, Hearthstone, Diablo, Heroes of the Storm, and the social media game, Candy Crush Saga.
Blizzard Entertainment invests in esports initiatives worldwide, including events for its ‘Call of Duty and ‘Overwatch’ titles. Activision Blizzard broke several release records in the gaming industry, securing the top position as the largest game publisher in Europe and America in terms of market cap and revenue.
This guide unpacks everything you need to know about Activision Blizzard the company & Where and how to to buy Activision Blizzard ATVI stock.
How to Buy Activision Blizzard Stock (ATVI)
- Ticker: $ATVI: Nasdaq
- PE Ratio (TTM): 33.80
- EPS (TTM): 2.39
- Earnings Date: Oct 31, 2022 – Nov 04, 2022
- Forward Dividend & Yield: 0.47 (0.58%)
- Ex-Dividend Date: Apr 13, 2022
- 1y Target Est: 93.09
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Activision Blizzard – Company History
Founded in 1979, the Activision company was a third-party developer for game titles produced for the Atari gaming console. The company expanded its operations into non-gaming software in 1988 rebranding to ‘Mediagenic.’ However, the venture sustained heavy financial losses.
A consortium of investors, led by Bobby Kotick, purchased the company in 1991. Kotick started his tenure at the company by restructuring its debt and rebranding the company back to ‘Activision.’ He moved the company to its current headquarters in Santa Monica, and things started to turn around for the business.
By 1997, Activision returned to profitability. As a result of his tireless efforts at the company, Kotick decided to spend the next decade expanding the range of Activision products while making 25 acquisitions of competing production studios.
As a result of the expansion, the company found itself developing several long-standing video game franchises, such as Call of Duty, Tony Hawk, and Guitar Hero. By 2006, massively multiplayer online (MMO) gaming started to take off, with LAN gaming becoming more popular.
The company’s franchise titles provide consistent revenue to publishers instead of a single purchase. As a result, the franchises are a value proposition for the company. However, it’s important to note that none of the Activision subsidiaries had the capability to create an MMO at the time.
Activision also started to feel the pinch in its market share, thanks to other companies like Electronic Arts gaining popularity with its range of sports-based gaming franchises. In 2006, Kotick entered into an acquisition of French media conglomerate Vivendi, looking to buy its games division, Vivendi Games, which Kotick wished to use as a holding company for Blizzard Entertainment and Sierra Entertainment.
Kotick wanted to acquire Blizzard’s ‘World of Warcraft’ title, which already had a reputation as a successful MMO. Instead, Vivendi countered with a deal to merge Vivendi Games with Activision, provided Vivendi kept control of the company.
The company decided to go ahead with the merger, believing it was the key to the MMO market and penetrating the Chinese video game market. The merger went ahead in 2007, with the new company being named ‘Activision Blizzard’ while retaining headquarters in Santa Monica, California.
Activision announced Bobby Kotick as its president and CEO, with René Penisson from Vivendi appointed company chairman. The European Commission allowed the merger to be complete in April 2008, ensuring there were no anti-trust violations in the deal.
July 2008 saw Activision announce that its stockholders agreed to the merger. The deal closed on the next trading day for an estimated $18.9 billion. Vivendi received a 52% stake in the company, making it the largest shareholder.
The balance of outstanding shares went to a private sale to institutional and private investors and was left open for trading on the NASDAQ exchange under the ticker $ATVI. The merger concluded in July 2008, with Lévy replacing René Penisson as the chairman of Activision Blizzard.
Blizzard retained autonomy in the merger. However, other divisions of Vivendi Games, such as Sierra, ceased their operations.
Activision Blizzard – Games
Activision blizzard achieved the title of the largest video games publisher in the world by 2010. Its release of ‘Call of Duty: Modern Warfare 3 in 2011 grossed the company $400 million on its UK and US release, achieving the feat in less than 24 hours. At the time, it was the biggest media release in history.
The company held the previous record for its release of Call of Duty: Modern Warfare ($310 million) in 2009 and Call of Duty: Black Ops ($360 million) in 2010. Call of Duty: Black Ops III achieved $550 million in global sales on its opening weekend in 2015, securing the title of the biggest media launch of the year.
Activision Blizzard relies on sales of its video game titles as its core source of revenue. However, the company has a diverse business model, receiving income from several other divisions. Activision Blizzard has three separate divisions: Activision Publishing, Blizzard Entertainment, and King Digital.
Each company division is incredibly successful, with extensive titles covering several gaming platforms. Activision relies on the video game console business as its primary revenue stream. However, it does release titles for PC and mobile devices.
The key game franchises in this division are Call of Duty, Destiny, and Skylanders. The company uses independent design studios and in-house resources for its game development. Sledgehammer Games, Treyarch, and Infinity Ward, are subsidiaries of Activision. They swap turns on creating annual updates to the Call of Duty franchise.
Bungie develops the Skylander titles. It’s an independent production studio formerly known for the iconic ‘Halo’ game franchise.
Blizzard is responsible for developing PC titles, but it also develops games for mobile devices and consoles. The biggest title on its roster is ‘World of Warcraft.’ However, the company is also responsible for the hugely popular Diablo and StarCraft franchises.
Activision Blizzard acquired King Digital, a mobile developer. Its core gaming titles include the insanely popular social media video game title, ‘Candy Crush Saga,’ as well as ‘Farm Heroes’ and the ‘Bubble Witch Saga .’ King Digital operates a free gaming model, monetizing it through in-game transactions by users.
Activision and Blizzard offer a few free-to-play games. However, most of its catalog is games sold at retail prices. Activision Blizzard also collects revenue from game subscriptions to tiles like World of Warcraft. Call of Duty players can also purchase in-game features, such as maps, weapons, and kits.
Activision Blizzard also generates revenue through selling smart toys and game discs for consoles. The Skylander franchise was the pioneer in the ‘toys-to-life’ industry. Toys-to-life are physical action figurines used in conjunction with a digital video game.
It’s one of the biggest-selling aspects of Activision Blizzard’s business, bringing in more than $ 3 billion in sales to date. In 2021, Activision Blizzard generated $4.6 billion in revenue, with King Digital bringing in $2 billion in sales.
The addition of King Digital to the Activision Blizzard stable of companies will assist Activision Blizzard with diversifying its income streams into various markets. In 2014, World of Warcraft, Call of Duty, and Skylanders accounted for over 66% of Activision Blizzard’s net revenue.
The strategy seems to be paying off for the company. In 2016, less than 10% of revenue came from King Digital, with that figure increasing to 30% by 2021.
Activision Blizzard – Growth Prospects
The company’s growth potential centers on video game trends affecting the video gaming industry. The video game market experienced huge growth in the last two decades, and analysts expect the growth to continue. Price Waterhouse Coopers projected that the global video game market could exceed $93 billion in annual revenues by 2021, goring at an exponential rate of 5.7% per year.
However, Activision blizzard faces some stiff competition from Electronic Arts. Its ‘Battlefield’ series is a close competitor to the call of Duty franchise. However, as a company, Activision blizzard may transition from a video game publisher to an entertainment conglomerate in the years ahead.
Activision Blizzard recently hired executives from TV and Hollywood to create its film studio. Activision Blizzard wants to use the influence of its popular video game franchises to produce successful films and TV series in the coming years.
Activision Blizzard is also actively engaging in esports. The company intends to become a sponsor of events, as well as host live esports events for its popular franchises like Call of Duty. Its esports Hearthstone tournaments have received live coverage on ESPN.
Activision Blizzard – Valuation and the S&P 500
Activision Blizzard received inclusion in the S&P 500 in late August 2015. Alongside EA, it’s the only video gaming company on the list. In September 2015, Activision blizzard released the next generation of the Skylander franchise, adding more vehicles to the ‘toys to life’ gaming category.
Activision and Bungie followed up with the release of ‘Destiny: The Taken King,’ to much acclaim by the gaming community. The game ended up breaking the record for the ‘most downloaded day-one game in the history of PlayStation.
Activision Blizzard is a profitable company, and analysts can calculate valuations based on conventional metrics, such as price-to-earnings ratio on a forward and trailing basis. Both Activision Blizzard and Electronic Arts are expensive stocks with trailing P/E ratios above 20.
However, looking at the growth potential for both companies, we see that they aren’t overpriced. The Saudi Arabia Public Investment Fund acquired 14.9 million shares of Activision Blizzard in February 2021, in a deal valued at $1.4 billion.
While the stock benefitted from the mania of 2021, reaching an all-time high of $103 in February 2021 before falling to $58 in Q4 2021. However, the company recovered some of the losses, trading in the $80 range for the majority of 2022.
The company looks to be a good buy, with the potential for the Microsoft acquisition to bring more volatility to the price action of $ATVI stock in 2023.
Future Roadmap – The Microsoft Acquisition
The gaming world awoke to amazing news in January 2022. The software and gaming giant, Microsoft, announced its intention to acquire Activision blizzard in an all-cash deal valued at $68.7 billion in an all-cash deal or $95 per share
The announcement saw Activision Blizzard’s stock take a massive gap higher in pre-market trading on the Nasdaq. While the deal is still pending, Microsoft and its Xbox home gaming platform have yet to officially acquire any ownership in Activision Blizzard. Still, analysts expect the deal to finalize soon.
The market covers all new game releases from Blizzard and Activision. Good news for Xbox and Windows gamers came from the acquisition. They could receive an easier access to the Activision blizzard content library. Still, it depends on the actions of the Federal Trade Commission in approving the deal.
Currently, Microsoft is waiting on authorization for the acquisition by the FTC before it can conclude the purchase. The sale comes with Microsoft acquiring the rights to the Activision Blizzard content library, including the Call of Duty, World of Warcraft, and Diablo gaming franchises.
If the FTC doesn’t request any additional information from Microsoft regarding the acquisition by the end of August 2022, we can expect the deal to go through without any issues.
Xbox plans to assimilate Activision Blizzard into its Xbox brand by summer 2023, but this might happen sooner than expected, depending on the government decisions involved with the merger process.
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