As the entertainment industry is growing, demand for premium content is increasing at a solid pace and many companies in this market are engaged in fetching this relishing piece of cake. Activision (ATVI, Financial) is one such company. The company is enjoying a leading position in the market in terms of great quality content production and has achieved milestones in this 2014 so far. Having launched two major franchises, Activision is looking to add more value to its content portfolio by new addition in it. Seeing this positive growth momentum, Activision is expecting a double digit growth in the revenue and earnings by the end of fiscal 2014. Let us have a closer look.
A look at the strengths
The biggest strength of the company is its world class games. It has launched Destiny in the past which turned out to be a solid attraction across the globe in the IP gaming industry. Also, its Hearthstone has now over 20 million registered users which reveals a solid traction that its games are seeing in the market. Activision wants to continue this momentum and to facilitate this, Activision is now focusing on delivering some of the best in class content in its history this year for some of the leading entertainment franchises such as Skylanders TRAP TEAM and Diablo III: Reaper of Souls. Moreover, Activision is also confident of good user engagement with its Call of Duty: Advanced Warfare in the upcoming quarters which will maintain its image in the market.
Another strength of the company is its 20-year positive track record of creating some most iconic brands through its leading content delivery. To keep this momentum rolling, the company will continue to expand its franchise portfolio. Moreover, to add more value to this, Activision is investing significantly in its rich franchise library. In addition, with the growth in the digital world and the ramp up in the use of tablets, mobile devices and gadgets, Activision is bringing in free-to-play games in this platform. This is expected to create good value for Activision in this realm as well and to back up this strategy, Activision is working on 2 more releases on this platform this year including Heroes of Storm and Activision’s Call of Duty Online.
Innovation in focus
Activision is engaged in bringing innovation to its existing portfolio as well. With the growth in the demand for new content, it is releasing first expansion pack, The Dark Below. This comes with all new map, mission, gears and weapons. Not only this, but Activision is also working on expansion packs of other games too to engage more gamers to its games in future. Also, Activision is excited about the launch of tablet version of Skylanders which will enable the full console experience on the million tablets worldwide.
Call Of Duty has been Activision’s to shot games. To further ramp up the user engagement with this, the company has recently launched Day Zero edition which is a special 24-hour early access SKU with additional digital content. The company is pleased to see the robust response for initial day zero and it thinks it to be a good contributor to its growth story in future. This game provides good opportunity for the company in China as it has already got positive results which it got out of beta testing with Tencent. It is a major opportunity for the company to expand its reach and emerge as a largest player community in the upcoming quarters.
Conclusion
With a trailing P/E of 20.72 the stock looks reasonable and the forward P/E of 16.03 indicates good growth in the earnings in the near term as well. Also, a solid profit margin of 18.94% is impressive and the stock is expected to gain much market share on the back of it. Thus, from the investment perspective, Activision Blizzard is a good pick as of now.
