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Activision Blizzard: What We're Watching Now

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Here's what could unlock even more value in the video game giant's business.

Activision Blizzard (ATVI 0.47%) has performed quite well, with shares up by more than 70% over the past year. But there's reason to believe the company's growth isn't done just yet. In this Fool Live video clip, recorded on Jan. 25, contributor Jason Hall discusses Activision Blizzard's potential with colleagues Matt Frankel, CFP, and Brian Withers. 

Jason Hall: Activision Blizzard, ticker ATVI. This is a very, very, long, long-term rec in the foolish universe. A lot of us are familiar with sitting on this stock and waiting and waiting and waiting and waiting and watching it go sideways for years and years and years, and then things finally changed. The former majority owner of the company finally sold their stake. The big French conglomerate moved on and it just seemed to unlock the power of this business.

Activision Blizzard, if you're not familiar, this is the company behind popular video game titles including World of Warcraft, Call of Duty, Overwatch. What all those titles having common, they're console then PC games for the most part. For a couple of years, we watched some stagnation happen in that area. The consoles were getting close to the end of their life cycle. There was another cycle going on for Activision Blizzard with a lot of its titles, and the results really weren't that great. But again, the industry goes through those cycles. Things started turning the corner last year between the now upgrade cycle with the consoles.

Then you have Activision Blizzard's planned refreshes of a lot of its popular games. Has some new releases that are coming out this year. It's really set for a great 2021 and even beyond.

Let's not forget about the acquisition of King, used to be called King Digital, back in 2016. King has really helped Activision Blizzard enormously in the next really great growth opportunity in gaming, and that's mobile gaming. King counts for about two-thirds of the company's 428 million monthly active users. It's a pretty big indication of where people are engaging with gaming today.

Revenue fell about 14% in 2019. In this year, it was up 18% through the last four quarters. I think sometime pretty soon here we're going to get another quarterly report that's going to be pretty big. It's likely to surpass $8 billion dollars in revenue. 2021, that'll be an all-time high. Net income is over $2.2 billion over the past four quarters. Again, that's a record 42%. I think it's really on track to continue to climb higher.

You think about how popular gaming is, this is an industry that generates far bigger revenues in the movie industry and has for 30 years, you start thinking about virtual reality, augmented reality. As those technologies get better, it's likely to lead to many more years of growth.

Honestly, I think there are a few companies that are better positioned than Activision Blizzard just to participate in that growth. Not only does the company already have this stable of immensely popular and valuable titles, but has the deepest pockets by far in the industry to fund developments of the next iteration of gaming technology. I love this business. It's one that I just kind of ignored in my portfolio because I know they're very well run. They're really good at just letting their studios innovate and getting out of the way. Guys, anything to add there?

Matt Frankel: Not especially. It's not one that I really follow that much. One thing I'm curious about for both of you, do you own either of the first few stocks we've talked about?

Hall: Yeah, I own both. Brian, you're muted. I'm sure whatever you said was wonderful, but we didn't hear a word of it.

Brian Withers: It was brilliant. I'm not going to be able to...

Hall: You can't even repeat it. Don't even try.

Withers: Have it come out the same way the second time. Yeah, I'm own Shopify (NYSE: SHOP). It's my second largest. My kids own Activision Blizzard.

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