Video game company Activision Blizzard (Activision Blizzard Stock Quote, Chart, News NASDAQ:ATVI) should be your target if you’re looking for a cheap but good pickup, says fundmanager David Baskin.
After a major selloff to end 2018, ATVI has done moderately well in 2019, but there’s more upside to be had, says Baskin, president of Baskin Wealth Management, speaking to BNN Bloomberg on Tuesday.
“It’s a pick of our analyst and director of research,” says Baskin. “Call of Duty, which is Activision’s main platform, has had the fastest launch of any video game in history. The video game industry is much bigger than the movie theatre business now — this is big bucks we’re talking about.”
Activision Blizzard was a solid gainer for a good half-decade before the wheels fell off last fall. The stock lost half of its value between October 2018 and February 2019, with the blame falling on weaker retail demand for its slate of games, declining monthly active users and the disruption to the video game space caused by free-to-play powerhouse Fortnite.
But the company’s fortunes could be turning for the better with the release of new versions of industry staples Call of Duty and World of Warcraft. Activision Blizzard has also garnered a bona fide hit in Call of Duty: Mobile, which amassed 100 million users in its first month.
“I think Activision Blizzard fell out of favour because of Fortnite,” said Baskin. “People felt that everybody was playing Fortnite and no one was ever going to play another video game, and that’s just not the way it is.”
“This is a huge industry and it’s got big legs going forward, and we like Activision Blizzard and we think that this is a really excellent entry price,” said Baskin.
Currently trading in the mid-$50 range, ATVI is well off its record high of $84.68 set in October of last year.
The stock dropped on the company’s latest earnings report, delivered on November 7, which saw Activision Blizzard beat top and bottom line estimates. The company posted $1.28 billion in sales for its third quarter ended September 30, 2019, compared to $1.5 billion a year earlier, and non-adjusted earnings of $0.38 per share versus $0.42 per share a year earlier. Analysts had been calling for non-adjusted earnings of $0.23 per share. (All figures in US dollars.)
The company bested its own guidance call for the quarter’s revenue and earnings, with boosts to its active users driving much of the comeback, said Activision Blizzard CEO Bobby Kotick.
“Recent launches have enabled significant growth in the size of our audiences for our Call of Duty and World of Warcraft franchises. As we introduce mobile and free-to-play games based on our franchises we believe we can increase audience size, engagement and monetization across our wholly owned franchises,” said Kotick in a press release.
“With a strong content pipeline and momentum in mobile, esports and advertising, we are confident we will remain a leader in connecting and engaging the world through epic entertainment,” Kotick said.