Analysis: Activision Blizzard Being Added to the S&P 500
Activision Blizzard, Inc. is being added to the S&P 500 Index on Friday after the close, in a move that solidifies the company's dominance as a 3rd party developer.
Activision Blizzard, Inc. is being added to the S&P 500 Index on Friday after the close, in a move that solidifies the company's dominance as a 3rd party developer.
Activision Blizzard has a market capitalization over $20 Billion and continues to crank out mega hits with their diverse gaming franchises. The company will replace Pall Corporation in the Index and will now have increased institutional ownership by many fund managers who mimic the flagship stock market index. ATVI is up over 7% after-hours, but I would not chase this move. The stock trades at over 18 times forward earnings and at a premium to its growth rate.
Additions to stock market indices can also be viewed as a kiss of death for some companies as they become far more correlated to broad market moves. In a world where stock market futures trading determines individual stock movement, this addition to the S&P 500 may not be completely good news. It does validate the company's business model and is a credit to the hard work of everyone at the Activision Blizzard.
Game development is now a multi-billion dollar industry and the stock market is finally wising up to this fact that video games companies can be great investments. I want to reiterate that readers should not chase this after hours move in ATVI shares as I believe that the company is now priced for perfection with a dividend yield below 1% and a premium price-to-earnings ratio. The bar has been raised for Activision Blizzard, Inc. and it remains to be seen if they can continue their outperformance. ATVI has risen 5600% over the last 15 years.
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replyAsif Khan posted a new article, Analysis: Activision Blizzard Being Added to the S&P 500
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Exactly, but I wonder how much more is left in the tank. WoW numbers are fading, COD is losing its luster, but hey they got Skylanders and Destiny and a great track record. I just think after this latest run that their is better value elsewhere in the gaming space.
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Hearthstone is adding a non trivial amount of recurring revenue and they haven't really amped up monetization options yet (ie non gameplay affecting cosmetics like avatars, play mats, card backs, sound packs, etc)
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I'm sure HOTS will probably do OK as well.
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Overwatch is very much an unknown, HotS has lots of potential but is still in its infancy with 2 behemoths ahead of it. Hearthstone is well established as the genre leader (and creator in many ways for a lot of its customers) and has a user base already poised to bring in even more than it's already doing (likely around $100 million/year), is one of the top Twitch games every day, etc. And its closest analogue has been printing money for 20+ years so there's reason to believe the concept has staying power even as they watch WoW decline.
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Asif, I have to say that this sort of reporting is unique amongst the gaming websites I frequent. Did you want to do a video version of this, perhaps even a question and answer series?
You might want to "dumb it down" for investing neophytes since some of our audience may not know some of the terminology that you are using.
Also, it's interesting that you mention that listing in the S&P 500 means the stock gets thrown into index funds and all sort of other non-company related forces!-
Yeah, it is definitely a different take, I like it.
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agreed
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I don't understand a sentence in that article.
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Sorry. What do you need clarified?
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Ah, don't mind me, I know nothing about the stock market. :)
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TL;DKWTF - Activision is getting listed to another stock index.
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That's good!
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Well, it can be, it might not. The hows and whys require understanding the article.
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That's good!
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Can I go now?
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Not until you eat the toppings.
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Some definitions for people:
Earnings per share (EPS):
This is the total earnings of the company divided by the amount of shares of the company outstanding
Price-to-earnings multiple:
This is a way to compare share price based on earnings. You divide the share price by the EPS to calculate this.
Market Capitalization:
This is the total value of the company. It is calculated by multiplying the share price by the amount of shares outstanding.
Growth rate:
This is how fast the company's earnings are growing year over year.
Dividend yield:
This is the per share dividend divided by the share price.
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ATVI?
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That is the stock symbol for Actvision Blizzard
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Oh, I thought it was some acronym, thanks.
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It's better to put it in brackets after mentioning the company name for the first time.
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Good idea, I will be sure to do that in future articles.
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Great article - showed it to some of the guys on my team.
I know there aren't a ton of news bits along these lines but that is a great write up! 2nd to last line is classic. -
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Can I touch you?
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It would be pretty hard to measure my individual contribution, but I'd have to say that you could wipe CoD off the face of the Earth and FPS wouldn't be in a much different situation. The studios that make FPS games have not been bringing anything new lately, and there are few new entrants. That's the real problem.
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Sick Spaceballs reference...
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Now you are just trying to make me angry, knowing full well that the USDA Economic Research Service (http://www.ers.usda.gov/publications/ldpm-livestock,-dairy,-and-poultry-outlook/ldpm-254.aspx) CONTINUES to IGNORE the very important duck and horse markets. So for now I'll continue to receive dividends in live cattle http://data.cnbc.com/quotes/%40LC.1 until such time that there is either an FMV for either ducks or horses or at least a cow level in Legacy of the Void.
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Correct.
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Exactly.
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Good point.
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Did he resurrect mercury? Where do I sign up?
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Thanks buddy!
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AS IF!
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I love you. And not just because you have a briefcase.
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Wait, isn't WoW almost dead? They're down to the population of Minnesota or Colorado, I think. How do they even make money anymore?
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Hearthstone.
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Oh, that game WTF242 is bankrolling. Gotcha.
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Will do!
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How does the relationship to Activision, and now being listed in the stock market, help Blizzard?
Aren't they basically being forced to now give away a good chunk of the money they make with their games to even more parasites: shareholders, in addition to non-value-adding management like Bobby at Activision?
I thought Blizzard did financially good enough to pursue all their projects, even WoW, without needing loads of backing. Or am I wrong about this? -
If anyone would like cheap games or controllers, this is the perfect place, Black Ops III for instance for only 30,-, it's a certified site and you can safe up to 40 bucks on a game: https://www.g2a.com/r/surenderf8
