Should You Exit This NASDAQ-Listed Entertainment Stock – ATVI

Jan 06, 2022 12:00 AM PST | Team Kalkine
Should You Exit This NASDAQ-Listed Entertainment Stock – ATVI

Activision Blizzard, Inc.

ATVI Details

Activision Blizzard, Inc. (NASDAQ: ATVI) is an interactive entertainment developer and publisher for video game consoles, personal computers (PCs), and mobile devices. Its operating segments are 1) Activision Publishing, Inc., which offers the Call of Duty League franchise, 2) Blizzard Entertainment, Inc., which specializes in the digital distribution of Blizzard and Activision games, as well as online social networking and the development of user-generated content and 3) King Digital Entertainment, whose key offering is Candy Crush saga.

Latest News:

  • Launch of Call of Duty: Vanguard: ATVI released Call of Duty: Vanguard worldwide on November 05, 2021, including unrivalled Call of Duty content, a riveting single-player narrative, 20 multiplayer maps on day one, and an all-new Zombies experience that expands on the existing story canon.

Q3FY21 Results:

  • Flat Topline Growth: The company witnessed YoY growth of 5.94% in total net revenues to USD 2.07 billion in Q3FY21 (ended September 30, 2021) compared to USD 1.95 billion in Q3FY20, driven by 6.53% growth in In-game subscription and other revenues.
  • Improvement in Net Income: In Q3FY21 net income increased to USD 639 million from USD 604 million in Q3FY20, representing diluted earnings per share (EPS) of USD 0.82.
  • Strong Balance Sheet: As of September 30, 2021, the company had cash & cash equivalents (including money market and other short-term investments) of USD 10.00 billion and total debt of USD 3.61 billion.

Key Risks:

  • Franchise Concentration Risk: ATVI's FY20 revenues comprised 76% of sales from the Call of Duty, Candy Crush, and World of Warcraft properties. Such reliance on a small number of product categories could be harmful to the company's operations in the long run.
  • Third-Party Dependence: The success and widespread acceptance of third-party video game consoles are critical to ATVI's product sales, with Sony's PS4 and PS5, Microsoft's Xbox One and Series X, and Nintendo's Switch accounting for a large share of the company's net revenue. Any decline in customer demand for these consoles could harm the company's bottom line.


  • Revenue Estimate: ATVI expects to clock revenue of USD 2.02 billion and USD 8.66 billion in Q4FY21 and FY21, respectively.
  • EPS Estimate: It also expects its GAAP EPS of USD 0.54 and USD 3.27, along with a Non-GAAP EPS of USD 0.62 and USD 3.70, in Q4FY21 and FY21, respectively.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ATVI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ATVI's stock price has increased 15.54% in the past month and is currently leaning towards the lower band of its 52-week range of USD 56.40 to USD 104.53. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 63.84. We have valued the stock using the EV/Sales multiple-based relative valuation methodology and arrived at a target price of USD 62.00.

Considering the uptick in the stock price, technical indicators, and current valuation, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 67.115, down 0.13%, as of January 05, 2022, 11:26 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.