What’s Happening With Activision Blizzard Stock?

ATVI: Activision Blizzard logo
Activision Blizzard

Activision Blizzard stock (NASDAQ: ATVI) has seen a 3% fall in a month, performing in line with the broader S&P500 index, also down 3%. The company reported an upbeat Q2 and is also addressing the regulatory hurdles surrounding the proposed Microsoft acquisition of Activision Blizzard. In the longer term, ATVI stock is up 53% from levels seen in late 2019, faring better than the S&P 500 index, up around 35%.

Interestingly, ATVI stock had a Sharpe Ratio of 0.4 since early 2017, which is lower than 0.6 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.

This 53% growth for ATVI stock since late 2019 can primarily be attributed to 1. Activision Blizzard’s revenue growth of 34% to $8.7 billion over the last twelve months, compared to $6.5 billion in 2019, 2. the company’s P/S ratio rising 17% to 8.2x trailing revenues, partly offset by 3. a 2.3% rise in its total shares outstanding to 787 million. This has meant that the company’s revenue per share metric has risen 31% to $11.07 now, compared to $8.44 in 2019. Our dashboard on Why Activision Blizzard Stock Moved has more details.

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The gaming industry is witnessing a slowdown in user engagement after robust growth during the pandemic. For perspective, Activision Blizzard’s total average MAUs rose 15% to 401 million in 2021, compared to 349 million in 2019, before the pandemic. This metric has now fallen to 356 million as of June 2023.

Activision Blizzard is home to some of the largest gaming franchises, including Call of Duty and Candy Crush. Activision’s Q2 2023 results, announced last month, were better than street estimates. It reported net bookings of $2.5 billion, reflecting a substantial 50% y-o-y growth. The company benefited from its key franchises, including Call of Duty, but the launch of Diablo IV was the key revenue growth driver for the quarter. The company’s total monthly active users (MAUs) decreased slightly to 356 million, compared to 361 million in June 2022.

Microsoft’s proposed acquisition of Activision Blizzard did face regulatory hurdles. However, last month, the U.S. FTC official withdrew the agency’s case that sought to block this acquisition. The U.K. Competition and Markets Authority blocked this transaction earlier, but it is now re-looking at the deal. It is expected to come up with a decision by August 29. Microsoft and Activision Blizzard have extended the timeline for the merger agreement to October 18, 2023 (earlier, it was July 18), awaiting UK regulatory approval.

Returns Aug 2023
MTD [1]
YTD [1]
Total [2]
 ATVI Return -2% 19% 152%
 S&P 500 Return -4% 15% 97%
 Trefis Multi-Strategy Portfolio -8% 18% 280%

[1] Month-to-date and year-to-date as of 8/17/2023
[2] Cumulative total returns since the end of 2016

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