Based on the research data analyzed and published by ForexSchoolOnline.com, Activision Blizzard stock has soared 111% since the end of 2016. Prior to the market fall occasioned by the Coronavirus pandemic, it was up 70%. The company’s shares started 2020 at $58.65, rising to $82.63 by the end of July. This translates to a more than 38% growth rate for the duration between January and July 2020.
Not only has it managed to grow tremendously during one of the worst bear markets yet but it also has achieved this during a period when its revenues have decreased. The same research data reveals that over the same three-year duration, its revenues have in fact dropped by 1.5%. A Newzoo report comparing its revenues for Q3 2018 and Q3 2019 similarly shows a -18% YoY drop from $1.4 billion to $1.1 billion.
Among the key driving factors contributing to this mismatch is an expansion of the P/E multiple. Investors placed a higher value on its future earnings growth, expanding the multiple from 16.2x to 29.4x. During this period too, the earnings per share (EPS) and margin expansion grew by 5.7% and 10% respectively.
The margin growth is attributed to Activision’s focus on digital downloads over physical games, which have a lower COGS (cost of goods sold). Furthermore, the company did not release any expansion for World of Warcraft in 2019. It plans to release this in 2020, alongside additional game launches.
Doubtless too, it has benefited from the COVID-19 crisis, which has led to increased traction for gaming as more people stay home. This explains why the stock has significantly outperformed the overall market. For instance, the S&P is down at least 12% and has not seen much change in its P/E ratio. On the other hand, Activision is one of the few S&P value stocks that are expected to grow in 2020.
The company also happens to be part of an industry expected to enjoy a CAGR of 14.9% during the period between 2018 and 2023. It operates multiple eSports leagues for its top titles such as Overwatch and StarCraft among others.
Activision’s Call of Duty Mobile is the Most Downloaded Game Ever with 250M Downloads in 265 Days of Launch
Notably though, Activision stock was doing great even before the pandemic, as it was up 25% in 2019. Part of the reason for this is the high demand for its latest game in the franchise, Call of Duty. In July 2020, Call of Duty: Modern Warfare was ranked second in top-selling games globally, behind Sony’s Ghost of Tsushima. Also, it is the top selling game YTD (ending July 2020).
Following its launch in the fourth quarter of 2019, Call of Duty Mobile went on to become the most downloaded mobile game ever. In its first week alone, it scored more than 100 million downloads and a whopping $10 million in revenue. According to data from SensorTower, it surpassed the early success of other popular shooters like Fortnite and PUBG.
When Fortnite launched its mobile version in April 2020, it had 22.5 million downloads from the Apple App Store and made $3.3 million in revenue during its first week. However, Call of Duty Mobile had 56.7 million downloads and made $8.5 million on the App Store in the first week. It is noteworthy too that the game is free to play and only relies on micro-transactions for revenue.
PUBG Mobile, on the other hand, has long held the title of the most downloaded mobile game. But its reign came to an end when Call of Duty Mobile hit 250 million downloads in 265 days of launch. Within a similar span of time, PUBG had 236 million downloads, while Fortnite had 78 million.
Activision Stock Ranks Sixth in Video Games Space with 39.9% Growth YTD
Interesting highlights also emerge from a comparison of Activision stocks and its competitors in the gaming and eSports sectors. As of May 2020, Activision’s stock was up 26% YTD and is currently at 39.9%. On the other hand, Electronic Arts and Take-Two Interactive had less than 10% YTD growth for the same period.
Fast forward to the present day, Electronic Arts stock is up 32.55% YTD. In contrast, however, Take-Two Interactive has had a significant uptrend since then, as it is reporting a 44.56% growth rate YTD.
It, therefore, comes as no surprise that Take-Two Interactive stock is currently ranked third among video game stocks according to the IBD Stock Checkup Tool. EA stock ranks fourth and Activision stock is in sixth place. NetEase stock is the highest ranking while SciPlay comes in second.