Investing in stocks is tricky. But what if you get a stock that has been pummelled over the course of this year and still remains a market favorite? You would want to get in.
Leading gaming company Activision Blizzard [ATVI] is one such company. Shares are down 26% in 2018. Stocks of major gaming companies have also depreciated considerably this year. Electronic Arts (EA) has slipped 20% this year while Take-Two Interactive (TTWO) is down over 3%.
The largest gaming company in the world (Tencent [TCEHY]) has lost almost a quarter of its market value (amounting to a whopping $125B) year to date.
These gaming companies have had a stellar run over the last few years. This market correction has been long overdue and shares are now trading at conservative multiples.
Activision Blizzard shares are trading at $46.52 a share which is 45% below its 52-week high of $84.68. Since the start of October, shares have declined over 44%. With a relative strength index of 27, Activision Blizzard shares are trading well into oversold territory.
The share is trading just above its 52-week low. Activision shares were at these levels way back in February 2017. The stock has grossly underperformed broader markets and burnt significant investor wealth. However, this pullback in shares provides investors with an opportunity to enter the stock.
So why do you need to invest in the stock? The fundamentals are strong. Activision Blizzard has significant upside potential with robust earnings growth driven by expanding profit margins. Let’s have a look at each of these metrics.
Activision Blizzard has bottomed out
Activision Blizzard shares were impacted by the mind-boggling success of Fortnite. Activision’s latest “Call of Duty: Black Ops 4” title generated $500 million in the first weekend of its launch. While this is mighty impressive, the “Call of Duty: Black Ops 2” saw sales of $500 million in the first 24 hours since its launch.
Investors and analysts were expecting a similar response and were left disappointed. It also reported a fall in monthly active users (or MAUs) from 384 million in Q3 2017 to 352 million in Q3 2018. All of these factors sent the stock spiraling downwards.
It certainly seems that Activision Blizzard shares have bottomed out and are set to take off on their next bull run. All the recent events have been priced in that has led to this massive decline. So what will drive the stock upwards?
Activision Blizzard is one of the premier gaming companies with a market cap of $35.5 billion. Yes, there are other companies such as Electronic Arts (EA) and Take-Two Interactive [TTWO] that are direct competitors, but with a solid portfolio of franchises, Activision Blizzard can easily hold its own.
Despite the recent pullback, Activision Blizzard has created significant value over the years. It has risen 173% in the last five years and 400% in the last ten.
Strong gaming portfolio
The company has time and again released blockbuster franchises over the years. Though “Call of Duty” is Activision’s flagship franchise, it has other vastly popular games such as “World of Warcraft,” “Star Craft,” “Destiny Overwatch,” and “Hearthstone.” Yes, the recent “Call of Duty” game was not as well received as expected, but $500 million sales in three days is still mind-blowing.
Activision also acquired King Digital way back in 2015 for $5.9 billion to enter the digital and mobile gaming space. King Digital’s portfolio includes “Candy Crush,” “Bubble Witch” and “Farm Heroes.” The move into digital has resulted in a stable stream of recurring revenue for the firm.
Despite the fall in monthly active users, Activision Blizzard stated that the average user still spent 52 minutes gaming daily — an all-time high. It also has seven of the top 20 most viewed games on the industry’s largest streaming platform.
In-game purchases crossed $1 billion in sales for the third consecutive quarter.
The strategic shift toward eSports
Activision Blizzard has also been one of the first movers into the high growth eSports vertical. “Overwatch” found major success, and Activision Blizzard signed multi-million dollar deals with broadcasting partners such as Amazon’s [AMZN] Twitch.
It has now added six new teams bringing the total number of teams to 18. The eSports industry is still at a nascent stage and will be growing at double digits over the next few years.
The eSports industry has opened up opportunities in verticals such as advertising and licensing as well.
High growth industry
The global games industry is a high growth one and is estimated to rise from $138 billion in 2018 to $180 billion by the end of 2021. The mobile gaming market will lead growth and rise from $70 billion to $106 billion in the forecast period.
It’s very likely that King Digital’s mobile portfolio will lead this growth, gain traction and expand revenue over time.
So what’s next?
Activision’s revenue has risen from $6.6 billion in 2016 to $7.15 billion in 2017. Analysts expect sales to rise by 4.4% to $7.47 billion in 2018, 3% to $7.7 billion in 2019 and 8.9% to $8.37 billion in 2020.
The shift towards digital gaming has massively driven profit margins for Activision Blizzard upwards. The operating margin for gaming firms is similar to those of traditional software companies.
Here’s what the experts say
With the recent price drop, institutional investors hold 93% in ATVI stock. Out of the 27 analysts tracking Activision Blizzard, 20 recommend a “buy” while seven recommend a “hold.” There is not a single “sell” recommendation.
The analysts have a low target price of $56 while the high target price is $93. The 12-month average target price stands at $73.69, indicating an upside potential of 58.4% from current levels.
Institutional investors are betting on Activision Blizzard. And you should too.
This Mogul Became America’s 1st Black Billion-Dollar Businesswoman
Where to start?
She’s the first black billion-dollar businesswoman. Before Oprah Winfrey.
She started as a TV executive, founding Black Entertainment Television (BET), the first TV network targeting African Americans. She then became a real estate mogul.
Oh, she also owns a stake in three major sports franchises, the NBA Wizards, NHL Capitals and the WNBA Mystics, the African American, period, to boast that claim.
In honor of Black History Month, let’s dive into her remarkable career.
- Born Sheila Crump in McKeesport, Pennsylvania, Johnson co-founded BET in 1979 with then-husband Robert Johnson. The couple sold it to Viacom in 2000 for $2.9B
- Sheila Crump Johnson became the first African American woman on the Forbes’ Billionaire list in 2000—beating Oprah Winfrey to the distinction.
- Per Forbes, Johnson has an $820M net worth as of 2019
Foray into real estate…
After closing the sale to Viacom, Robert and Sheila pocketed around $1.5B each. Johnson used that windfall as seed money to build a hospitality real estate empire in 2005.
“There’s a disparity in paychecks between whites and blacks,” she told the Wall Street Journal. “I will never forget that.”
As CEO of Salamander Hotels and Resorts, Sheila controls a spectacular portfolio of six luxury hotels in Florida, Virginia and South Carolina. And she’s built it from the ground up—literally—in her own spirit.
“I’ve been to many hotels, not only in the US, but all over the world,” she told Forbes last year. “And I wanted to find something that was going to really make Salamander stand out beyond all of these hotels.”
So what does that mean?
“You have to understand, there are a lot of people, investment companies, with very deep pockets,” she says. “They can do it, but they don’t have the experiences that we’re able to bring. I am constantly trying to find a way to help Salamander Resort & Spa stand out head over heels above any other hotel — not only in the area, but in the nation.
“I want them to leave that resort wanting to come back and not just say, ‘I’ll be back in six months.’ I want them to come back all the time.”
And so far it’s worked. In fact, on Forbes Travel Guide’s 61st list of Star-Rated hotels, Johnson’s Salamander Resort & Spa outside of Washington, DC earned a Five-Star distinction.
Forbes: “Everything [she] touches turns to gold.”
That’s a real quote. From Forbes. Last year. It’s also true.
BET? Billion-dollar exit. Washington Capitals? Stanley Cup.
And Roma. Won 10 Oscars. Who showed it before a single soul started caring? Johnson’s Middleburg Film Festival. (Which, by the way, has 32 films and counting in Academy Award contention.)
Remember her golf resort at Innisbrook? Oh, yeah. Hosts the Valspar Championship, one of the PGA calendar’s most-anticipated tournaments.
Becoming a billionaire comes with a new level of clout as well. “When you don’t have money, you’re not invited to special events; you really don’t matter,” she told WSJ. “It’s a society thing.”
So instead, she’s turned to giving back. Her Sheila Johnson Fellowship’s paid for more then 40 scholarships at Harvard University for students who otherwise wouldn’t afford to attend.
Breaking glass ceilings.
There’s an alarming statistic in business and diversity—especially as it pertains to women. According to research by investor Richard Kerby, 18% of all VCs are women—and only 3% are black. In addition, less than 50 black women ever have raised $1M in funding.
“When I got started,” Johnson says, “I couldn’t get a loan. I had to use my own money to get Salamander Resort and Spa.”
She explained to WSJ last year that men can go to any bank with a bank proposal. And no matter how “wacky” the idea is, she said, “they’re going to get the financing. Women do not have that ability.”
Johnson’s taken it upon herself to do something about that, becoming one of the founding partners of WE Capital, an investment firm that invests in female entrepreneurs.
“I started out in a very unique position where I had my own capital to be able to get started,” she says. “But there have got to be banks and investors that believe in helping women who want to be entrepreneurs in the hospitality business.
“And it’s just really, really important that they really take a look at this.”
5 Quick Ways To Get Rid Of Your Student Loans
Student debts have hit a whopping $1.5 trillion. To put that into perspective, you could buy the two biggest tech giants – Apple and Facebook, and still have money left to splurge. Nearly half the students who head to college take out student loans, and despite the worries on how you’re going to meet the interest and repay it all back, it’s doable if done right.
1. Consolidate Your Student Loans
You might have opted for multiple student loan options, all with with different payment dates, repayment terms, and interest rates. If you bunch them together, the perks could be significant – anything from extending your terms to decades, to enrolling in debt forgiveness programs.
2. Refinancing Your Old Loans
Some borrowers are given the option to refinance their loans by taking out a loan to pay down the old loan. The best bet is to refinance your older loans with a new loan at a lower interest rate. Here’s a great post that compares both loan consolidation and refinancing.
3. Gradually Increase Your Repayments
Paying off your debts right out of university might work out tough. But after you’ve settled into a stable job, raise your repayment levels every year and you can scratch months of repayment off your debt.
4. Check Out Employers Who Offer Assistance
While this should not be the only criteria to filter out your employer, an added incentive to finance your student loans could be a big bonus.
5. Use Your Lender’s Autopay Plan
Most loan programs come with an autopay program that gives a small discount of 0.25%. Does this help at all? If you look at repayments of small amounts over a short period, it might not be significant. This can be used to chip away at bigger payments you owe.
[VIDEO] ETF, Explained
Stocks, bonds, mutual funds, hedge funds, REITs, S&P, indices…there’s a lot of jargon that goes with investing. Lucky for you, #wealthgang, we have all the breakdowns here, in a non-boring way that’s easy to understand.
So what’s an ETF? Well, ETF stands for exchange-traded fund, which basically is a fund that owns various stocks. Giving you the luxury of diversifying your investment dollars into several stocks vs. just one.
Or as wikipedia puts it, an “ETF holds assets such as stocks, commodities, or bonds and generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value, although deviations can occasionally occur.”
There are now over 6,000 ETFs on 60 exchanges and ETFs exist for everything from corporate bonds to gold bars to oil futures.
If that doesn’t make sense, just check out this Bloomberg video.
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