Game developer Activision Blizzard has seen its stock price surge by 131% since the end of 2016, with its Call of Duty: Mobile franchise hitting an all-time high of 250 million downloads within 265 days of launch. Its newest game, Call of Duty: Warzone, has been a major contributor to Activision Blizzard’s Q2 tally of 125 million monthly active users, reaching 75 million players since its 10 March launch.
The leading video game holding company outperformed the overall stock market, reporting a tremendous 48% growth rate from USD 58.65 to USD 86.84 between January 2020 and early August, despite the pandemic. It is also one of the few S&P value stocks that are expected to grow in 2020.
However, Activision Blizzard’s stellar performance is starkly contrasted by the 1.5% drop in revenue over the same three-year duration. The company saw its annual revenue increase steadily from 2016 to 2018, before dropping to USD 6,489 in 2019 Q4 – a substantial 13.48% Y0Y decrease and one that placed their annual revenues below 2016 levels.
A report from ForexSchoolOnline.com attributes this mismatch between the stock’s strong performance and the company’s declining revenue to strong investor optimism, which placed a higher value on the firm’s future earnings growth. Reflecting this sentiment is the price-to-earnings ratio (P/E), which expanded from 29.51x to 35.03x since the end of 2016.
As an operator for multiple e-sports including such as Overwatch and StarCraft, the company is also part of a wider industry expected to witness a compound annual growth rate (CAGR) of 14.9% from 2018 to 2023, according to the ForexSchoolOnline.com report. The e-sports industry has also seen a significant bump in interest since the onset of the pandemic, with professional gamers netting over USD 3.6 million in prize money in the last 30 days, according to a recent report.
Activision Blizzard’s steadfastness is also a testament to the overwhelming success of its Call of Duty franchise. Following its launch in the fourth quarter of 2019, Call of Duty Mobile went on to become the most downloaded mobile game ever, scoring over 100 million downloads and a whopping USD 10 million in revenue within its first week alone. As of July 2020, Call of Duty is the top-selling game YTD, surpassing other popular shooters like Fortnite and PUBG.
Activision’s acquisition of Candy Crush Saga developers King also brought in 273 million monthly active users, with March, in particular, seeing a surge due to the ongoing pandemic. Thanks to worldwide stay-at-home orders, demand for video games, in general, continues to reach new heights.
In the broader video games space, Activision stock currently ranks sixth, according to the IBD Stock Checkup Tool. Competitor NetEase snagged the top spot, while Electronic Arts and Take-Two Interactive ranked fourth and second respectively – the latter of which reported significant growth up 44.56% YTD, as compared to 10% YTD growth in May 2020.