Activision Will Ride the Shelter-in-Place Trade to New Highs

Activision Blizzard (NASDAQ:ATVI) stock has long been one of the best ways to profit from the rise of the video gaming industry. And that trend is enjoying a huge acceleration now.

activison blizzard stock
Source: madamF /

In fact, thanks to the novel coronavirus, investors have been flocking into the so-called “SIP trades.” These are the stocks that are most likely to benefit from the “shelter in place” orders in the United States and around the world.

A few high-profile examples of SIP stocks include:

  • Amazon (NASDAQ:AMZN), the online shopping titan.
  • Peloton Interactive (NASDAQ:PTON), the vendor of premium stationary exercise bikes.
  • Electronic Arts (NASDAQ:EA), publisher and distributor of video games.
  • Ocado Group (OTCMKTS:OCDGF), a pioneer of robotic logistics and home grocery delivery.
  • Netflix (NASDAQ:NFLX), the leading subscription video streaming company.

All five of these stocks share one enviable feature: They hit new all-time highs over the past week! Activision has not yet reached a new all-time high, but I expect it to do so before the year is out. That’s because it benefits from the same desirable traits as these other five winning stocks. Already, Activision’s shares have been heating up, and they should have more room to run in coming weeks and months.

eSports Are Booming

One year ago, I pinpointed a trend I believed would fuel a powerful, long-term investment opportunity. I called it the “Screen Time Megatrend,” and highlighted the video gaming and eSports industry as one main beneficiary.

Already, eSports have become increasingly well-known as a popular emerging pastime. Wealthy investors have plowed hundreds of millions of dollars into creating professional leagues around various video games. Cable TV channels have covered some of the bigger matches. Young gamers are making serious money, and it’s become a real alternative to traditional sports. Even prior to the coronavirus and the ensuing shutdown of other professional sports for 2020, eSports were shaping up as a power player.

Industry analysts expect a slight dip in eSports’ momentum, at least on a professional level, due to the virus. Newzoo, for example, trimmed its eSports revenue estimate for 2020 from $1.1 billion to $1.05 billion as some live events have been canceled. However, the vast majority of the industry’s events should proceed as planned.

That’s light-years ahead of other professional leagues, which risk seeing most of their revenues wiped out entirely for 2020 if they can’t get games going again. And Newzoo doesn’t expect the virus to affect eSports’ long-term future; they see the eSports industry’s revenues rising to $1.6 billion in 2023, making for a 50% gain in just three years.

The Shelter-in-Place Megatrend

The coronavirus epidemic is supercharging the rise of video gaming and eSports. That’s the main reason I’m excited about Activision. Gaming was already on a major growth spurt even before the coronavirus hit. Now with everyone cooped up at home, companies like Activision are having a fantastic opportunity to establish new traditions and habits with users. And it’s not just young people gravitating to video games either; many adults are getting in on the fun as well.

The “Screen Time Megatrend” I started talking about a year ago is virtually the same thing as the “Shelter-in-Place Megatrend” many folks are talking about now. No matter what you call it, the societal migration from face time to screen time is not simply a fad or a generational quirk. It is a fundamental societal change.

Based on anecdotal evidence, the ranks of gamers worldwide has swelled significantly during the COVID-19 epidemic. Wall Street analysts agree. Morgan Stanley just reiterated its “outperform” rating on Activision Blizzard stock, noting that “[Video game] publishers continue to see increased player bases, engagement, and in-game monetization.”

Activision Blizzard Stock Verdict

After the crisis passes, most of these new converts may reduce their gaming time. But they won’t eliminate it. Activision has created tons of loyal new gamers during this crisis, and helped move up mainstream gaming adoption by many years. That in turn will funnel way more money into eSports leagues, gaming blogs, fan communities, and the rest of the ecosystem around digital entertainment.

In other words, what Wall Street analysts call the “addressable market” of video gamers has probably increased by tens of millions of dollars during the last few months. And the amount of money to be made goes up sharply as well. We’re not just talking about selling people a $49 disc once a year anymore. As gaming becomes a central passion for many people, they’ll be willing to spend far more on the product. Activision, as an owner of much of the best intellectual property in the space, will be a big winner.

And with its cash-rich balance sheet, Activision is ideally positioned to ride out this downturn and take advantage of opportunities both during the quarantine and once the economy starts to open back up again.

Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends … before they take off. And when it comes to bear markets, you’ll want to have his “blueprint” in hand before stocks go south. Eric does not own the aforementioned securities.

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