Analysis of Activision Blizzard Inc: Company Overview, Industry Insights, and Valuation
Activision Blizzard Inc, a leading video game developer and distributor founded in 1979, has a rich history in the gaming industry. The company operates globally and produces popular titles like Crash Bandicoot and Doom. The industry overview highlights the growth potential, with the global gaming market expected to reach $295.63 billion by 2026. Valuation analysis using ratios and DCF models suggests varying perspectives on the company's stock value.
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Presentation Transcript
Activision Blizzard Inc. Jacob Chase and Evan Busby
Proposal Company Overview Industry Overview Comps DCF Risks Recommendations Exit Strategy Conclusion Agenda
Proposal 5 Yr Price History BUY 120 100 Purchase $100,000 of ATVI Target Price: 122.70 80 60 40 20 Outstanding shares Value per share Market price 771,000,000 $ 122.70 $ 92.28 0 3/21/2016 3/21/2017 3/21/2018 3/21/2019 3/21/2020
Company Overview Activision was founded in 1979 as the first independent video game software developer and distributor, the company launched a series of multi-million unit selling titles in the early 1980s for the Atari 2600. Activision operates in more than 15 countries. Activision generates its revenue from sales of video games and in-game purchases. Activision acquired Blizzard and King Digital in early 2000s to grow their market share and diversify their presence.
Popular Products Other notable titles: Crash Bandicoot, Wolfenstein, Doom
Industry Overview In 2020 the gaming industry accounted for $37 billion in PC gaming and $77 billion in mobile gaming. The global gaming market in 2020 was valued at $162.32 billion and is expected to reach $295.63 billion by 2026. Videogames have grown to resemble competition-based, interactive movies, and the COVID-19 pandemic has propelled the industry to make more money than movies and North American sports combined.
ATVI is around the middle of the pack for their industry, however the industry is dominated by a few large firms that skew the data. Ratios
Valuation: Comp (EV/EBITDA) EV: 65.06 EBITDA: 2.1 EV/EBITDA: 30.98 Industry EBITDA: 34.06 Implied EBITDA: 71.517 Equity Value: 67.91 Value Per Share: $88.08 Overvalued 4.55% Rejected Market is comprised of firms of disproportionate size. EV/EBITDA has great variation across comps.
Valuation DCF Implied Value: $122.70 32.97% Undervalued WACC: 5.59% COD: 2.41% COE: 6.36% Beta: 0.86 RFR: 1.74% MRP: 5.36% LT Growth Rate: 2% IBIS world projects 7.1% industry growth Market is predicting roughly 0.65% growth
ATVI performance is related and confined by hardware manufacturers such as Sony, Microsoft, and Nintendo. This subjects them to the current chip shortage. Under fire for issuing a $200M bonus to their CEO during a large round of layoffs. The market is indicating a lower growth rate than we believe is accurate. Market has low barriers of entry which could lead to increased competition from startups. Risks
Purchase $100,000 of ATVI stock Market is poised to grow While ATVI is influenced by hardware manufactures the shift toward cloud-based gaming will mitigate this risk in the future. Recommendation
If ATVI does not reach $100 by March 2022 then liquidate 50% Mar. 2023 Exit Strategy Mar. 2022 If after the first liquidation ATVI does not reach 106 by March 2023 then liquidate the remaining 50%
