Microsoft’s proposed acquisition Activision Blizzard
We believe Activision Blizzard is poised for growth, regardless of the status of the transaction. The company is home to some of the biggest franchises, including Call of Duty and Candy Crush. Although the gaming industry is witnessing a slowdown in user engagement after strong growth during the pandemic, monthly active users (MAUs) are expected to rise in the coming years with the launch of new games. Despite the recent decline, MAUs for gaming companies are better than they were in 2019, before the pandemic. For perspective, Activision Blizzard’s total average MAUs grew 15% to 401 million in 2021, compared to 349 million in 2019, before the pandemic. This metric has now dropped to 368 million as of September 2022.
Activision Blizzard consistently improved its operating margins from 18.5% in 2017 to 37.0% in 2021, before falling to 27.0% over the past twelve months due to the impact of rising costs. Our Comparison of Activision Blizzard’s operating income the dashboard has more details. The company’s balance sheet is also robust, at 6% debt as a percentage of equity and 30% cash as a percentage of assets.
we estimate Activision Blizzard Awards to be $94 per share, more than 25% higher than its current market price of $75. ATVI shares are up 1% for the month, while up around 12% year-to-date. However, it remains well below the $95 price offered by Microsoft. At current levels, ATVI stock is trading at 20 times its estimated 2023 earnings of $3.73, compared to a three-year average of more than 24 times, meaning it has plenty of room to grow. Overall, any decline in ATVI stock from here can be used as a buying opportunity for long-term gains.
While ATVI stock has plenty of room to grow, it’s useful to see how Peers Activision Blizzard fare on the metrics that matter. Additional valuable comparisons for companies across industries can be found at Peer Comparison.
In addition, the Covid-19 crisis has created many price discontinuities that can offer attractive trading opportunities. For example, you’ll be surprised how counterintuitive stock valuation is Take-Two Interactive vs. Fair Isaac.
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