Activision Blizzard stock is still a great investment, this investor says

Gaming company Activision Blizzard (Activision Blizzard Stock Quote, Chart, News NASDAQ:ATVI) fits in well with the current stay-at-home economy but there’s more to the name than a pandemic distraction, says portfolio manager Shane Obata, who likes the way Activision Blizzard has stepped up its game of late.

“In the video game space we do like Activision Blizzard,” said Obata of Middlefield Capital, who spoke to BNN Bloomberg last Friday. “Gaming has been very resilient — it’s something that over time people didn’t really expect to do as well as it’s done. We think it will continue to do well.”

Owners of the Call of Duty and World of Warcraft franchises, Activision Blizzard has had a great year so far. Last week, the company reported third quarter earnings which featured revenue climbing to $1.95 billion compared to $1.28 billion a year earlier and EPS of $0.78 per share compared to $0.26 per share a year ago.

Management said engagement with its products exceeded the company’s earlier guidance, with titles Call of Duty: Modern Warfare and Warzone together seeing three times as many monthly active users as a year earlier. ATVI is pushing its mobile games more recently and reported “impressive levels” of reach and engagement from Call of Duty Mobile, which the company says has been the highest-grossing new game in the US since its launch last October. Looking ahead, management has called for fourth quarter revenue to top $2 billion.

“Our teams continue to execute our growth plans with excellence during incredibly challenging circumstances,” said Bobby Kotick, CEO, in a press release. “We are on a path to deliver sustained long- term growth across our fully-owned franchises. With confidence in our ability to continue to execute, we are raising our outlook for the year and remain enthusiastic for our growth prospects next year.”

So far, ATVI is up 29 per cent year-to-date, and that’s after a strong 2019 where the stock gained 28 per cent. But Obata says there’s likely more upside to come, even considering the company’s success this year.

“We definitely saw some demand pull forward during the pandemic — I think everyone that I know was buying some kind of video game or another. So, there may be a little bit of pull forward there but we do like this company very much over the long term,” Obata said.

“We actually have multiple favourites in the space but as a direct video game production company we like Activision a lot. Really strong franchises with Call of Duty on the Activision side and then on the Blizzard side they continue to make really good games that historically took a lot longer to to produce, but now they’ve stepped up the cadence. We were a little bit worried that that would lead to a reduction in quality but we don’t think that will happen,” Obata said.

“It’s definitely one of the best content providers in this space. We also like Take-Two Interactive. Those are probably our two favourite picks and US video games,” he said.