Opinions
John O'Connell, CFA
Activision Blizzard
ATVI-Q
BUY
Sep 18, 2018
$79.630
Stock price when the opinion was issued
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BUY ON WEAKNESS
Getting more compelling at these levels. Has stumbled with harassment lawsuits. Have a solid pipeline of franchises. Working on deepening the engagement of users. Beat on Q2. This name is trading at 18x 2022 with 11% compounding growth rate. Not cheap enough yet. Buy in the low $70s.
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DON'T BUY
Among the biggest losers on the S&P in 2021
#4, down 28%. Tricky. It could be considered a Covid, Peloton-like stock, but the other videogame companies haven't been hit as hard. Maybe it's due to ATVI delaying several new games. The elephant in the room, though is the CEO, facing a serious corporate culture viewed by Wall Street as frat boy.
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Microsoft recently announced the acquisition of the company. Has been facing a corporate culture crisis for the past year. Investors and employees optimistic that the takeover will benefit the company culturally and strategically. Social media mentions are up 1039% over the past week.
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Currently trading around $75 with an accepted buyout from Microsoft at $95 a share. A potential 26% arbitrage gain. The spread can be explained by the lack of a set date for when the deal would happen and the chance of it getting canceled. Social media mentions are up 333% over the last 24h.
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Activision Blizzard, Inc. connects and engages the world through epic entertainment. A member of the Fortune 500 and S&P 500, Activision Blizzard is a leading interactive entertainment company. It delights hundreds of millions of monthly active users around the world through franchises including Activision's Call of Duty® and Crash Bandicoot™, Blizzard Entertainment's World of Warcraft®, Overwatch®, Hearthstone®, Diablo®, and StarCraft®, and King's Candy Crush™, Bubble Witch™, and Farm Heroes™. Headquartered in Santa Monica, California, Activision Blizzard has operations throughout the world. Social media mentions are up 500% in the past 24h.
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SELL
Hold tight or sell with pending takeover?
From today's price, $5.50 is in play. As a shareholder, you have to decide if it's worth holding onto your shares to get your $95 per share. There is a chance that the FTC is successful in challenging the US court order, in which case you'd want to exit now. He'd probably take his money and go, as there's a lot to be said for certainty.
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They make the best games. They're getting into the battle royale market with new games. All videogame companies have been under a cloud because of this Fortnite controversy. He expects a 20% profit in ATVI in the next year.