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Saturday, January 28, 2023

Activision-Blizzard Stock: A Custom-Made Pandemic Play

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The Santa Monica, California-based Activision-Blizzard (NASDAQ:ATVI) is actually the most valuable of the video game stocks on the market. Activision-Blizzard stock has a valuation approaching $60 billion — larger than rivals Electronic Arts (NASDAQ:EA) and Take-Two Interactive (NASDAQ:TTWO) combined.

activision-blizzard stock

Source: Casimiro PT / Shutterstock.com

Still, Activision-Blizzard stock is holding up remarkably well through the pandemic and looks primed to keep growing both the top- and bottom-lines for years to come. That’s one of the main reasons I have ATVI as an A-rated “strong buy” stock in my Portfolio Grader. It looks primed to not merely survive the incredibly volatile year that is 2020, but to thrive in the years ahead.

Here’s a look at some of the factors that set Activision-Blizzard apart.

Impressive Q1 Results

One of the key barometers investors have had to use in early 2020 to project results into the future is  how companies have performed in arguably the most challenging business environment since the Great Depression.

In that respect, ATVI stock has been a standout, with both revenue and bottom-line numbers in the first quarter exceeding Wall Street estimates. Revenue crushed consensus expectations by margins rarely seen in the stock market, with Q1 revenue of $1.79 billion blowing past the $1.32 billion analysts were calling for.

The company’s profits also took investors by surprise (in a good way), with Q1 earnings per share (EPS) clocking in at 58 cents, or more than a 50% improvement from the 38 cents analysts expected.

It didn’t end there. According to ATVI’s press release, net bookings:

… were $1.52 billion, as compared with $1.26 billion for the first quarter of 2019. Net bookings from digital channels were $1.36 billion, as compared with $1.07 billion for the first quarter of 2019. In-game net bookings were $956 million, as compared with $794 million for the first quarter of 2019.

And for the cherry on top? Guidance was also incredibly reassuring; the video game giant behind games like Call of Duty, World of Warcraft and Candy Crush projected revenue of $1.69 billion in the second quarter, a 40% increase from the same quarter a year ago.

Activision-Blizzard also raised its full-year 2020 guidance, making this one of the rare “beat-and-raise” earnings reports investors will see in the middle of the pandemic.

So, why is ATVI enjoying such great times? The answer is simple. With most of the developed world forced to recede into lockdown for months now — and the future of work itself likely to become far more accommodating to the “work from home” model — leading video game stocks like ATVI have both current and future tailwinds.

Activision-Blizzard has been unknowingly built to thrive in a situation like this — the lack of public entertainment has forced consumers to turn to entertainment they can access in their own home, and with a portfolio of the wildly popular Call of Duty franchise, World of Warcraft franchise, and perennial mobile gaming favorite Candy Crush, it’s no surprise ATVI is killing it in 2020.

And the stock doesn’t just have momentum behind it — it’s up about 24% in 2020 through June 11 — it also pays a modest dividend of 0.6%, and has raised the payout for the last five years.

Bottom Line on Activision-Blizzard Stock

With little debt on its books and few companies able to weather today’s environment in a way that ATVI and its portfolio of top video games can, Activision-Blizzard stock looks like an outstanding bet in the medium- and long-term, as the market for video games continues its secular rise — pandemic or no pandemic.

The social dynamics of the developed world in 2020 as the pandemic continues ravaging most parts of the modern economy has left video game giants like Activision-Blizzard largely untouched. In fact, for ATVI stock, the pandemic has been a boon.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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