Activision Blizzard is increasing its user base and as well as it's overall video game engagement stats while at the same time its growth opportunities continue to increase. They've been expanding their user base and deepening their engagements and recently announced 544 million monthly active users (MAU) across Activision, Blizzard, and King.
Activision, which includes the Call of Duty franchise, increased its user count 10% to 55 million -- and Call of Duty itself, which was originally developed in 2003, is still not showing signs of slowing down, having achieved a record number of franchise MAUs.
As for Blizzard, its user accounts increased 23% year over year. Hearthstone, a free to play online collectible card video game, has reached 50 million players, and has received an 88 rating on Metacritic. Blizzard's newest offering, Overwatch, received even better ratings, with an impressive score of 91 and 7 million players just 8 days after its release.
Video games from Activision and Blizzard often require longer attention spans and therefore increase their stickiness. This approach pays off. Including King, Activision's 544 million actives users have spent 42 billion hours playing its games. That equates to roughly the same amount of hours spent on Netflix, and is over four times the amount of time people spend watching sports. Increasing user count easily translates into revenue and profits by increasing the opportunities for gamers to make in-game purchases. Activision Blizzard's first-quarter non-GAAP revenue from in-game content grew 20% year over year to more than $620 million. Call of Duty reached new records for in-game content sales, while Season Pass, which gives Call of Duty players access to expansion packs and extended content, achieved record attach rates.
In-game advertisingIncreasing user numbers and engagement is also an opportunity for the company to increase in-game advertising revenue. With the acquisition of King Digital, Activision Blizzard has gained access to 463 million users. According to App Annie, King has had 3 of the top 15 grossing games on U.S. app stores for the last 9 quarters. With access to popular mobile franchises such as Candy Crush, Pet Rescue, and Farm Heroes, Activision Blizzard is hoping to take advantage of a huge revenue opportunity with in-game advertising. According to Reuters, some analysts see a $500 million opportunity with in-game advertising, and one analyst from Wedbush Securities believes advertising could be accretive by over $3.00 per share.
Activision, which includes the Call of Duty franchise, increased its user count 10% to 55 million -- and Call of Duty itself, which was originally developed in 2003, is still not showing signs of slowing down, having achieved a record number of franchise MAUs.
As for Blizzard, its user accounts increased 23% year over year. Hearthstone, a free to play online collectible card video game, has reached 50 million players, and has received an 88 rating on Metacritic. Blizzard's newest offering, Overwatch, received even better ratings, with an impressive score of 91 and 7 million players just 8 days after its release.
Video games from Activision and Blizzard often require longer attention spans and therefore increase their stickiness. This approach pays off. Including King, Activision's 544 million actives users have spent 42 billion hours playing its games. That equates to roughly the same amount of hours spent on Netflix, and is over four times the amount of time people spend watching sports. Increasing user count easily translates into revenue and profits by increasing the opportunities for gamers to make in-game purchases. Activision Blizzard's first-quarter non-GAAP revenue from in-game content grew 20% year over year to more than $620 million. Call of Duty reached new records for in-game content sales, while Season Pass, which gives Call of Duty players access to expansion packs and extended content, achieved record attach rates.
In-game advertisingIncreasing user numbers and engagement is also an opportunity for the company to increase in-game advertising revenue. With the acquisition of King Digital, Activision Blizzard has gained access to 463 million users. According to App Annie, King has had 3 of the top 15 grossing games on U.S. app stores for the last 9 quarters. With access to popular mobile franchises such as Candy Crush, Pet Rescue, and Farm Heroes, Activision Blizzard is hoping to take advantage of a huge revenue opportunity with in-game advertising. According to Reuters, some analysts see a $500 million opportunity with in-game advertising, and one analyst from Wedbush Securities believes advertising could be accretive by over $3.00 per share.
 Activision Blizzard Monthly Chart |  Activision Blizzard Dividend History |
Activision Blizzard, Inc. develops and publishes online, personal computer (PC), video game console, handheld, mobile, and tablet games. The company operates through two segments, Activision Publishing, Inc. and Blizzard Entertainment, Inc. The company develops, publishes, and sells interactive software products and content through retail channels or digital downloads; and downloadable content to a range of gamers. It also publishes subscription-based massively multiplayer online role-playing games; and strategy and role-playing games. In addition, the company maintains a proprietary online gaming service, Battle.net that facilitates the creation of user generated content, digital distribution, and online social connectivity in its games. Further, it engages in creating original film and television content; and provides warehousing, logistical, and sales distribution services to third-party publishers of interactive entertainment software, as well as manufacturers of interactive entertainment hardware products. The company serves retailers and distributors, including mass-market retailers, consumer electronics stores, discount warehouses, game specialty stores, and consumers through third-party distribution, licensing arrangements, and direct digital purchases in the United States, Canada, Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South Korea, China, and internationally. Activision Blizzard, Inc. is headquartered in Santa Monica, California.
(Summary) (Company) (Chart)
| 26 December 2016 Price $36.50 1yr Target $48.73 Analysts 19 Dividend $0.26 Payout Ratio 22.60% 1yr Cap Gain 33.50% Yield 0.71% 1yr Tot Return 34.21% P/E 31.71 PEG 1.41 Beta 0.97 | EPS (ttm) $1.15 EPS next yr $2.16 Forward P/E 16.91 EPS next 5yr 22.47% 1yr Price Support $48.53 Market Cap $27.51 Bil Revenues $5.95 Bil Earnings $867.00 Mil Profit Margin 14.57% Quick Ratio 1.40 Current Ratio 1.40 Debt/Equity 0.72 | 1yr RevGR 5.80% 3yr RevGR -1.33% 5yr RevGR 0.95% 1yr EarnGR 5.30% 3yr EarnGR 5.56% 5yr EarnGR 29.24% 1yr DivGR 15.00% 3yr DivGR 8.42% 5yr DivGR 8.92% ROA 6.20% ROE 12.30% |
Operating Units.
Activision Blizzard has five operating units:
Iconic Entertainment Franchises
The company's roster of iconic franchises include the following:
Activision Blizzard has five operating units:
- Activision develops, distributes, and publishes deeply immersive interactive entertainment for gaming consoles, mobile and tablet platforms, and PCs, including blockbuster franchises like Call of Duty, Skylanders and Destiny.
- Blizzard Entertainment develops, distributes and publishes some of the most iconic entertainment experiences in gaming, such as World of Warcraft, StarCraft, Diablo, Hearthstone, and Heroes of the Storm for PCs, mobile, tablet platforms, and consoles.
- King Digital Entertainment creates leading interactive entertainment for the mobile world. With more than 200 fun titles, King's franchises include Candy Crush, Farm Heroes, Pet Rescue, and Bubble Witch.
- Media Networks builds on Activision Blizzard's competitive gaming leadership by creating all-new ways to deliver best-in-class fan experiences across games, platforms and geographies.
- Activision Blizzard Studios makes original film and television content based on our library of iconic and globally-recognized intellectual properties.
Iconic Entertainment Franchises
The company's roster of iconic franchises include the following:
- World of Warcraft
- StarCraft
- Diablo
- Hearthstone
- Heroes of the Storm
- Overwatch(coming in 2016)
- Call of Duty
- Skylanders
- Destiny
- Candy Crush Saga
- Candy Crush Soda Saga
- Candy Crush Jelly Saga
- Farm Heroes Saga
- Pet Rescue
- Bubble Witch
My strategy going forward
Activision Blizzard has pullback to its lower Bollinger Band three times in the last two and a half years and four times in the last four years, and each time the stock bounced from there for a very nice return. Today its once again sitting near the lower Bollinger Band so I believe its at an acceptable level to start buying shares.
I believe this company has several avenues for monetizing their efforts besides simply selling video games and I think it's only a matter of time before they capitalize on those avenues. And I think that idea is expressed in the analyst's estimated five year earnings growth rate.
With the recent 20% pullback in the price of these shares, I find these shares quite reasonable, especially with the forward projections of earnings increases and the rapid reduction of the P/E ratio in the years ahead. I think gaming still has a great future and Activision Blizzard will remain at the forefront of this business.
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