Shares of Activision (NASDAQ:ATVI) have been challenged over the past 12 months because of declines in video game sales. Activision is famous for their Call of Duty, World of Warcraft and Overwatch franchises, which have been a very successful. Even with the success of these franchises and a move into mobile gaming with their purchase of King Digital (Candy Crush) back in 2016, ATVI stock has not fared well over the past year.
Activision Blizzard stock is down 36.6% over the last 12 months compared to Electronic Arts (NASDAQ:EA) and Take-Two Interactive (NASDAQ:TTWO), which are down 17.3% and 8.54%, respectively.
Pre-Holiday Catalysts Ahead
Activision has a number of catalysts in the fourth quarter that should help boost the stock price. The next Call of Duty will be released in Q4, which should be a big driver of revenue growth during the quarter. In October Activision is launching Call of Duty: Mobile and Overwatch Legendary Edition. With all of these titles set to be released during the upcoming holiday season, I expect Activision to post strong numbers during Q4.
Narrative Links Gaming to Violence
One negative development for Activision is the fact that lawmakers have called out violent video games after the recent string of mass shootings. I am not going to take sides on this issue, but simply point out the market reaction.
President Trump spoke on violent video games and the stocks of the three major companies all posted a significant decline that day. Activision was down 5.96%, and peers Electronic Arts and Take-Two Interactive were down 4.63% and 5.18%, respectively. While I do not expect any meaningful legislation or the like to come out of this, investors should expect shares of the video game makers to be sold-off for a couple days if there is a shooting.
Bottom Line on Activision Stokc
The bottom line on Activision stock is it has a number of upcoming catalysts as the company is diving into the high growth areas of mobile gaming and eSports. The following chart from Newzoo shows revenue growth for each segment of eSports revenues has been growing at a substantial pace. With the Overwatch league and COD league, Activision should see some benefits from the continued growth in eSports.
Source: Newzoo
Another added bonus is the fact that Activision pays an annual dividend, unlike Electronic Arts and Take-Two Interactive, which do not. While the ATVI stock dividend yield does not make up for the underperformance, it does provide for a little bit of income.
At this time, I believe Activision presents a good value since the stock is down much more than its peers and it has a number of growth catalysts. As I noted above, anyone who is considering owning ATVI stock or other video game companies needs to be comfortable with the fact they will be a potential talking point target among politicians.
As of this writing, Brad Kenagy did not hold a position in any of the aforementioned securities.
