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The title is taken directly from the company's mission statement. Activision Blizzard (ATVI) is the video game holding company responsible for the biggest hits in gaming including Candy Crush, Call of Duty, Diablo, Hearthstone, Overwatch, World of Warcraft, among many others. The company is one of the oldest third-party video game developers. It has a successful track record that rivals the industry giants like Microsoft, Sony, and Nintendo. The company survived the great fall of revenue in the gaming industry in the mid-80s and came back strong years later. In the 90s Bobby Kotick bought the company and has been CEO ever since. Kotick is actually the longest-tenured CEO of an S&P 500 company. It's safe to say that Activision Blizzard has solid and reputable management.
The success of the company is mostly attributed to quality acquisitions of gaming studios. We're talking Activision, Blizzard Entertainment, King Digital Entertainment, Infinity War, Sledgehammer Games, Toys for Bob, Treyarch, and Vicarious Visions. If you don't know of or have played a game created by one of these names you are living under a rock, under a boulder, under a mountain. Video games produced by these studios have revolutionized their genres and the industry as a whole.
Countless hit games results in countless sales. The companies EBITDA has grown pretty steadily over the last 6 years and is forecasted to grow even faster over the next 4 years. EBITDA in 2014 was $1.5B. EBITDA in 2020 was $3.3B. EBITDA in 2024 is estimated to be $5.7B.
The semi-conductor "chip" shortage has created a great opportunity to invest in ATVI. Let's look at the numbers in a different way. Sony's PS5 sales within the first year are at 7.8 million units compared to the PS4 which sold 7.6 million units in the first year, and it hasn't even been a full year since the release of the PS5. The Xbox Series X is the same story but we don't know the numbers. 7.8 million units is not even the full potential of the PS5 sales. Sony and Microsoft have been stalled by the chip shortage. Gaming consoles have been selling out much faster than the companies can produce them. That being said, the chip shortage should calm down and Sony and Microsoft are doubling production. Limitless hype + double production = double sales.
But remember, I'm not suggesting anyone buys Sony or Microsoft in this thread. I'm suggesting you buy Activision Blizzard. The latest generation gaming consoles are equipped with SSD, AMD CPUs, and AMD GPUs that allow for ray tracing technology. The ceiling that limited the gaming experience has been shattered. Games will be more realistic, beautiful, fun, immersive, and addicting than ever before. Activision Blizzard makes the best games. Activision Blizzard's video game releases and sales are partially dependent on the gaming consoles reaching maximum sales.
The video game industry has changed drastically. The growth in the population of gamers and the diverse age groups that game today will slingshot the industry to a $300B market sooner than you might think. Adolescent kids, young adults, and older people that don't have jobs spend hours playing Call of Duty. Stay-at-home moms stare at their phone screens without breaks and relentlessly swipe their credit cards for more lives in Candy Crush. Everyone loves Activision Blizzard games.
Take a look at the technicals. Two years after the release of the last generation of gaming consoles (PS4 and Xbox One) ATVI stock price doubled. Less than five years after the aforementioned release the stock price quadrupled. Following a sharp dip in late 2018 the stock traded a wide base. The price then broke out from a C&H trend in late 2020 and has recently formed a bull flag. Currently, the stock is consolidating and should soon bounce off long-term support and break out from that bull flag. The stock is primed for a rally. My price target before the end of the year is +130.00.
There has never been a more exciting time for the gaming industry and Activision Blizzard is a great company with an impressive portfolio.
I bought shares of ATVI this morning at 92.95 to start a position and I'm looking to add more over the next couple months. I'm also looking to buy LEAPS but I have only glanced at the option chain. I don't suggest short dated options.