Updated: Aug 7, 2020
Activision Blizzard (ATVI) just released pretty stellar earnings; earnings 81 cents/share (non-GAAP, 52.8% YoY growth) and revenues of $1.93 B (38.4% growth YoY). If ATVI's stock price had not already appreciated substantially running into earnings, I estimate the stock would've shot much higher...
The company is performing well, but does it offer an enticing investment opportunity for new investors? My thoughts:
The stock, from a P/E multiple (37.2X) and P/S multiple (8.7X), is quite rich. Prior to this quarter, revenues growth, which I view as the most important valuation factor for ATVI, was a bit sluggish and didn't justify its valuation. However, with revenue growth now above 30%, the stock does look ever more enticing.
The business model is a plus; invest up front to make a game, then market it and pull in sales. Also, in today's locked up economy, content is king and ATVI produces some of the best interactive content out there. Maybe some day a big dog, looking to expand their portfolio of content, will look to snap up one of these independent game makers, certainly seems possible.
ATVI's cash balance outpaces its outstanding debt by more than 2:1. Therefore, ATVI is sitting well from a leverage perspective and has some flexibility for an acquisition if needed.
Conclusion: I like ATVI long term, but will admit it is a bit rich. I'd say buy and watch the growth rate; if it maintains solid growth, it will be a long term winner.