Is Activision Blizzard a Buy?

Activision Blizzard (ATVI) announced fourth quarter ended December 31, 2015 total revenue of $2.12 billion, down 4 percent year-over-year from $2.21 billion during the same period last year and slightly below the earlier revenue outlook for the quarter of $2.15 billion. Going forward, Activision has also provided revenue outlook for first quarter of fiscal year 2016 and forecasts total revenue to be $800 million.

Activision declared fourth quarter of 2015 net income of $159 or $0.21 per diluted share, down 56 percent year-over-year from $159 million or $0.49 per diluted share in the fourth quarter of 2014.
Moving ahead, the company estimates first quarter of 2016 non-GAAP EPS of $0.11.

The interactive software products development company reported continued year-over-year decline in both its top and bottom lines primarily due to unfavorable foreign currency translations.

Better times ahead

Activision has solid growth franchises coupled with highly-engaged communities with significant diversity across platforms, demographic reach, genres and business communities. Further, the key game-development company is consistently introducing innovation and steady content apprises to allow notable support for player investment and drive impressive engagement.

The monthly active users of Activision expanded 25% year-over-year during 2015 and reached their peak. In addition, Activision is believed to have over half a billion monthly active users after the completion of King Digital Acquisition. The company has hugely extensive game network across the globe, with more than 500 million users playing its games each month.

The key game development company is continuing to expand its new user base by completing strategic acquisitions, offering new and innovative games that attract new users and investing extensively for offering game player after sales support. This superior growth strategy is expected to drive impressive company’s top line growth while allowing it to offer attractive shareholder returns.

Importantly, the Board of Directors at Activision Blizzard, Inc. recently announced a quarterly cash dividend of 26 cents per share to be paid on May 11, 2016 to all the key stakeholders as of the business closure on March 30, 2016 and representing a 13% growth from the cash dividend offered during 2015 which is in line with the company’s continued commitment to deliver attractive shareholder returns.

The entertainment offerings franchises package of Activision include World of Warcraft, Call of Duty and expected to be soon launched Candy Crush all are believed to reach more and more people on every platform including, desktop, console and mobile devices in nearly all nations across the world.  Hence, the highly diversified product portfolio of Activision enables it with a solid opportunity to involve its worldwide audiences while creating impressive top line growth from advanced content and innovative services. Activision’s efforts, improved by its latest acquisition of key League Gaming, enable it to reward its players across the globe for their investment and commitment in its games.  Going forward, Activision expects to deliver nearly $6.25 billion of revenue and more than $2.0 billion of income from operations during 2016 while simultaneously enhancing its dedicated workforce.

The breathtaking gaming experience across all the digital platforms being offered by Activision is the key reason behind the company’s expanding its new user base and growing user community which has allowed it to deliver impressive top line growth while offering attractive shareholder returns.

Conclusion

Overall, the investors are advised to “Buy” equity in Activision Blizzard, Inc. considering the company’s solid long-term growth prospects with attractive PEG ratio of 1.01 and much better than the industry’s growth average of 0.96. The profit margin of 19.13% seems extremely impressive. However, Activision needs to optimize its debt-burdened balance sheet with significant total debt of $4.08 billion against weaker total cash position of $1.83 billion, restricting the company to make future growth investments.
Published on Apr 18, 2016
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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