Reasons to like Activision Blizzard
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Reasons to like Activision Blizzard

Activision Blizzard hasn’t had a great couple of months. One of the main reasons for this is the popularity of competitor title Fortnite, and another is that it’s not clear what Activision has in the pipeline to combat this game. But investors should look beyond the headlines and into Activision Blizzard’s actual company reports to assess the strength of the company – there’s a lot to like in there!

Despite recent woes, Activision Blizzard’s share price is still up by 36% over 12 months

graph 1704 activision

SOURCE: Yahoo Finance

While investors may be looking for Activision to release another big blockbuster, the company’s reports show an opposite strategy: diversifying players over a broader portfolio. The company’s four top franchises, Call of Duty, Candy Crush, World of Warcraft, and Overwatch, accounted for 66% of its revenue last year. That’s down from 69% in the previous year and 75% in 2015. While revenue is rising, it’s becoming less dependent on the company’s headline blockbusters, and that’s a good thing: if one of those titles sees a suddent slump, the company is becoming progressively more protected from it.

This trend goes beyond video games. Activision Blizzard used to be a pure play games develop and publisher. But over the past two years, the company has begun branching out, positioning itself as a facilitator of eSports – touted by many to be the “next big thing” for video games – and its making more of its intellectual property. Activision has started creating films and television content based on the universes its games are set in to compliment its wider licensing agreements.

The video games industry as a whole is also becoming less seasonal and more profitable as a result of digital downloads. As Activision continues to forge an industry-leading digital network, investors should expect to see the fruits of better margins further down the road.

Disclosure

Dominion holds Activision Blizzard in its Global Trends Ecommerce Fund.


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The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.