This Could Send ATVI Stock Soaring in 2016
One of the top gaming stocks in the sector is Activision Blizzard, Inc. (NASDAQ:ATVI), which is widely known for its “Call of Duty” franchise that has hundreds of millions of players spreading the globe. Sales of the just-released Call of Duty: Black Ops III totaled in excess of $550 million in the first three days after its launch. Making the numbers more staggering is the fact that Call of Duty’s diehard fans played the game online for more than 75 million hours during this three-day period. These numbers are simply staggering and they have resulted in huge profits for ATVI stock. (Source: “Call of Duty: Black Ops III Scores over Half a Billion Dollar Opening Weekend,” Yahoo! Finance, November 11, 2015.)
While the metrics for Call of Duty are impressive, the gaming company also markets the hugely popular “Warcraft” product series, which includes the highly successful World of Warcraft, among other games.
But what is really stroking my bullish theme for ATVI is its game-changing decision to pay $5.9 billion for King Digital Entertainment plc (NASDAQ:KING), the developer of the massively popular mobile “Candy Crush Saga” franchise products, which have amassed a worldwide cult following. The company’s titles include Candy Crush Soda Saga, Farm Heroes Saga, Pet Rescue Saga, and Bubble Witch 2 Saga.
While King Digital’s mobile games may sound somewhat outlandish, the acquisition adds a critical mobile element to the scope of Activision, something that could help propel the company to the next level as a go-to game developer and, more importantly, help diversify its revenue stream away from the Call of Duty franchise. The expansion into the mobile technology sector will be another step forward for ATVI stock to become a more complete entertainment company.
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Talking numbers, King Digital will add about $2.0 billion in revenues to Activision’s current $5.0-billion base. However, what is extremely encouraging is King Digital’s user base, which runs at more than 500 million users in nearly 200 countries, a reach that extends into nearly every corner of the world.
With the addition of King Digital’s massive number of users and cult-like following, Activision has the opportunity to be a great stock, as the company evolves and tries to monetize its increased user base.
The company is aggressively embarking on gaining traction in the high-growth e-sports market after establishing a unit in October to deal with this area.
ATVI is also looking at producing movies based on its popular game franchises. Can you imagine a Call of Duty movie? I think it would be a massive hit worldwide for not only the hundreds of millions of active gamers, but for the broader market as well.
All of the above could prove to be a huge boost for ATVI stock.
Here’s the Bottom Line on ATVI Stock
The company has established Activision Blizzard Studios to produce television and big-screen films under the stewardship of former Walt Disney Company (NYSE:DIS) executive Nick van Dyk. It will just be a matter of time before we see the Call of Duty franchise on the silver screen.
Looking ahead, I wouldn’t be surprised if Activision expands its success beyond video games and becomes a major entertainment company that could return some sizzling gains for stock market investors.