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Activision Blizzard Tours Wagons – Activision Blizzard, Inc. (NASDAQ: ATVI)



For the most part of the past five years, Activision Blizzard (NASDAQ: ATVI) is seen as an almost necessary purchase in the gaming industry.

  Activision 5-year Commodity Chart

: Yahoo! Finance ATVI)

The last six months are a completely different story. Activision 6-month stock chart ” width=”640″ height=”337″ data-width=”640″ data-height=”337″ data-og-image-twitter_small_card=”true” data-og-image-twitter_large_card=”true” data-og-image-twitter_image_post=”true” data-og-image-msn=”true” data-og-image-facebook=”true” data-og-image-google_news=”true” data-og-image-google_plus=”true” data-og-image-linkdin=”true”/>

(Source: Yahoo! Finance ATVI)

The company that looked like an automatic purchase , lost favor on the market, as projections for 2019 did not meet expectations. Investors face two options. The first is that Activision Blizzard's shares moved too far and too fast and the shares needed a reset period. The other option is that the business model of the company is broken and the shares are dead money. The truth is probably somewhere between the two conclusions.

Signs of Life?

There are two recent developments that can give hope to Activision's investors. First, the company is preparing to release Call of Duty Mobile this summer. This franchise is one of the most popular and durable of Activision. The company will make the app free to play and offer Team Deathmatch, Search and Destroy and Free-For-All modes. Activision describes the offer as "the ultimate first-person action in the new mobile title with incredible graphics and visceral Call of Duty gameplay."

One of Challenges to Call of Duty Mobile is the adaptation of first-person shooters to a touchscreen. Google Play has to go up to app 40 before you find PUBG Mobile as the top rated shooting game. In the iTunes App Store, the highest rated shooter is Fortnite at number 9. Outside of Fortnite there is no other similar game shooter in the top 100 apps. Call of Duty can break through, but to make players accept a shooter game without a physical controller, it is still a significant leap up.

The second development that Activision suggests can see better days is that one of the company's directors recently made a significant purchase of the company's shares. As Peter Lynch once said, there are many reasons for a director to sell shares, but they buy shares for just one reason … they expect the price to rise.

Director Peter Nolan paid $ 4.3 million for 100,000 shares at an average price. from $ 42.95 per share. Prior to this purchase, he announced that he had 7,455 shares, 1638 limited shares and 54,792 shares through trust. When a director commits to increase his shares by over 156%, it is a significant vote of confidence. The fact that investors can buy at a price less than 10% when the director has acquired his shares implies a decent entry point.

Signs of trouble

"Bungie is one of the leading studios in our industry and we are extremely pleased to have the opportunity to work with our talented team over the next decade. "It was a comment by Thomas Touple, Operision Director of Activision, when discussing the link between Activision and Bungie in 2010

To say that things changed the years are underestimated. One of the most important franchises for Bungie is Destiny. It was not until 2016 that Activision praised Bungie, saying, "Destiny continues to have a big engagement audience." By 2017 Activison once again praised it for its fate. 2. The company commented that "Activision has 55 million MAUs … powered by successful startup campaigns. "Call of Duty: WWII and Destiny 2." In addition, Activision said: "Destiny 2 is the second best console game in North America for the year."

At the end of 2018, Bungie received $ 100 million from NetEase. Some claim that after this investment, Bungie's relationship with Activision has become tense. Whether it's perfectly accurate or not, the reports suggest that Bungie works for Destiny franchise fans, while Activision insists on regular releases and profits. In the beginning of 2019, Activision announced it would be parting with Bungie.

The consequences of this division will cost investors in two ways. First, whether Destiny is or did not work as expected, this removes the franchise and all future Activision Finance releases. Second, and perhaps more importantly, a number of lawsuits have been brought against Activision

The lawsuits are essentially about Bungie's division and whether Activision has informed its shareholders precisely about the situation. Law firms and shareholder groups clearly think they have a lawsuit. Schall Law Firm, Klein's Law Firm, Rosen Law Firm, and many others claim the same thing … Activision made false or misleading statements about Bungie's franchise. Whether these court cases end in court, are settled, rejected, or otherwise, Activision can not afford the distraction, expense, and negative attention these movements carry.

Blizzard of questions

Beyond the division of Bungzard Activision there seem to be a lot of challenges. First, co-founder of Blizzard Mike Morhaime and former financial director of the company. The reasons for these deviations can be related to costs. A former employee said, "We are told to spend less in every corner because we do not have a new IP." This makes sense, but it must be discouraging for Blizzard's loyal players. Games like World of Warcraft (WOW) have existed for more than a decade, but the decline in WoW users is a relative constant.

When it comes to Overwatch, the game is surrounded by Fortnite, PUBG, Call of Duty Eclipse and more. Prior to the rise of the royal regime battle, Overwatch seemed to dominate the shooter genre. On the one hand, Overwatch just added a new Baptiste character. On the other hand, overwatch pro players seem to have found a winning strategy that has led to predictable results before this addition.

One of Blizzard's other big franchises is Diablo. Although the traditional game has loyal followers, the development of mobile games offers additional questions. Players were not silent about their discontent with Diablo Immortal (Diablo's mobile game). The video game trailer on YouTube received 2.9 million views in three days. On the surface, this will sound good, but the views have led to more than 430,000 reluctances, compared to only 16,000 likes. Diablo Immortal site

  The players expressed dissatisfaction with not being against the Diablo mobile game but "waited too long for another Diablo 3 or even better, Diablo 4" . Until then, and after the division of Bungie, Activision focuses on more important franchises. At the last conference, Coddy Johnson COO said the company expects the number of developers working on Call of Duty, Candy, Overwatch, Warcraft, Hearthstone and Diablo will grow by about 20% next year. </p><div><script async src=

Diablo 3 was released as early as 2012, and although expansion packages have come since then, players are still waiting for Diablo 4. According to sources, Diablo 4 is likely several years. In addition Diablo Immortal is not yet available. According to the site, the company is "soon in the iPhone App Store". Users on Android are asked to "register in advance on Google Play."

At the core of Blizzard's problems there may be something that is relatively simple for Activision to determine. Blizzard has to expand its most popular games to more players on more platforms. Even with the challenges Diablo can show investors the future of the Blizzard division

Diablo will soon have games on PC, PS4, Xbox One and mobile devices. If we look at other Blizzard games, there are holes that leave some gamers out of the circle. Overwatch can challenge Fortnite and others, but with PC, PS4 and Xbox One, how about mobile gamers? Hearthstone is available on a computer and a mobile phone, but what about the main consoles? Probably the most important Blizzard franchise, World of Warcraft, is only available for PC and Mac. It is true that World of Warcraft requires the desktop application Blizzard Battle.net to play, but how about the PS4 or Xbox players? Will Blizzard not be able to create a subscription for mobile players?

Electronic Arts (NASDAQ: EA) is already dealing with these issues among its most popular games. Madden is already available on several platforms. Star Wars Battlefront treats console gamers and Star Wars: Galaxy of Heroes is a highly rated mobile game. If Blizzard wants to grow significantly in its business, expanding its most important franchises to more players is an important step.

Another type of Blackout

The names of Activision are Call of Duty. Every annual version of the game is spoken with great anticipation and its sales are carefully monitored. The Call of Duty version 2019 should come from Infinity Ward, as Activision moves in a predictable fashion between different development companies. Call of Duty Ghosts have never been extended and have been largely closed. One reviewer said: "The ghosts never go beyond the requirements of continuation." The multiplayer mode of the game was described as "malnourished" and the campaign was called "frozen".

The newer version of Infinity Ward was Call of Duty Infinite Warfare. This game has also been negatively reviewed. One reviewer said, "As he came out, the Call of Duty community was tired of double jumping and wall and science-fiction things."

The next game is expected to take off in the modern. War titles that received better reviews. From what we know, Infinity Ward will return a single player, multiplayer, and Battle Royale campaign. The Battle Royale mode will allow players to use some of the well-known Modern Warfare characters such as soap, ghost and price. At first glance this sounds like all the right moves, but the game faces a few unanswered questions

First, how will the next Battle Royale mode be executed if it is not connected to Blackout by Call of Duty Black Ops 4? The reason why games such as Fortnite and the newest hit Apex Legends continue to do so well is the expectation that these games are a constant concern. This leads us to the biggest question facing the next Call of Duty. How do you convince players to pay $ 60 for a game when the royal battle mode is not linked to the previous version? Very simple: do not do it. Players who are invested in Blackout will probably find it hard to leave their progress just because a new game is released.

Another challenge is that the battle royal regime is more burdensome. The Battlefield V Firestorm will be available on March 25, introducing targets for powerful weapons and "17 types of vehicles, including tanks and towed guns, a helicopter prototype and even the desired tractor." Although Battlefield V's sales have failed to meet expectations, Firestorm can reverse this. The key behind Battlefield V is Electronic Arts, which views it as a "long-term service plan," not just an annual edition.

Even after significant challenges over the past six months, Activision still shares bringing forward P / E to more than 21 based on 2019 ratings. However, analysts expect slightly over 7% annual stock growth over the next five years. What is also a challenge is that estimates for 2019 are reduced by only 20% over the past 90 days.

While some may see Activision's focus on the company's biggest games as net positive, I see it as a long-term negative. By focusing on existing games, Activision has greatly reduced its ability to find and release new titles. If Electronic Arts puts all of its eggs in existing franchises, a surprise hit such as Apex Legends would be challenging if not impossible to release.

Although EA has made similar P / E progress to Activision, the 5-year EPS growth rate of EPS is higher at 10%. In addition, EA has taken advantage of new titles such as Anthem and upcoming Star Wars: Rise to Power. Apex Legends is not built into EA's predictions this year but has found early success. The end result is that Activision seems to be traveling around the wagons, EA seems to be expanding and taking risks. For long-term investors, EA seems to be the best option.

Disclosure: I / We have no positions in any of the listed shares and I do not intend to initiate any positions in the next 72 hours. This article, and it expresses my own views. I do not get compensation for him (except from Seeking Alpha). I have no business relationship with any company whose shares are mentioned in this article.


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