Activision Blizzard (NASDAQ:ATVI) released its first-quarter results on May 4. The company beat analysts' expectations on the top and bottom lines with sales of $2.28 billion and earnings per share of $0.79 for the quarter. Management is guiding for $8.37 billion in 2021 sales, and the company says it wants to hire 2,000 more developers across its studios over the next few years.

Even though Activision Blizzard has had a strong showing the past 12 months, partially due to the COVID-19 pandemic, there is still a long runway for this company to grow over the next decade. Here are three reasons to get excited about its stock.

A guy using a video game controller with a headset on.

Image source: Getty Images.

Call of Duty dominance

A few years ago, in the wake of the Fortnite free-to-play boom, the company's Activision unit decided to revamp its Call of Duty strategy. Consumers can now access that franchise in four different ways: the annual premium title, Call of Duty Mobile, Call of Duty Warzone (a free-to-play battle royale Fortnite competitor), and the Call of Duty esports league. Mobile, Warzone, and esports not only bring in their own profits but also drive more users to purchase the newest premium Call of Duty title each year. As of the latest updates, Warzone now has 100 million players worldwide, while Call of Duty Mobile has been downloaded 500 million times since its launch in late 2019. 

The fruit borne by this strategy has shown up across Activision's user and financial metrics. In the first quarter, Call of Duty monthly active users (MAUs) grew 40% year over year with revenue for the segment up 72%. And with a stellar operating margin of 50%, the Activision studio contributed $442 million of the company's consolidated $853 million operating profit last quarter. Call of Duty Mobile, Warzone, and the esports league are still in their early innings, and this four-pillar strategy should drive profit growth for at least the next few years, if not longer.

The resurgence of Blizzard

The Blizzard studio is currently the laggard among Activision Blizzard's three major segments. Sales only grew 7% in the quarter, and many top executives (including two of its co-founders) have left in recent years, leaving investors to worry about the state of the studio behind fantasy hits like World of Warcraft.

However, Blizzard's period of stagnation could be ending soon. Diablo II: Resurrected is due out later this year, and the mobile title Diablo Immortal is launching soon as well. Overwatch League, one of the most popular esports leagues in the world, announced a partnership with Billibilli to broadcast matches in China. While these titles are currently not as important as Call of Duty to the overall profitability of Activision Blizzard, getting this studio back to double-digit sales growth would be a step in the right direction.

Mobile investments

On the first-quarter conference call, management mentioned the company eventually wants to get all of its franchises into mobile formats in some form. They've already moving in this direction with the Call of Duty Mobile and Diablo Immortal titles, but they plan to push these initiatives even further to capture more of the $77 billion mobile gaming market. Plus, with the King studio under its umbrella, Activision Blizzard can leverage the sustained success of Candy Crush for other games like World of Warcraft

For example, King just debuted Crash Bandicoot: On The Run! on March 25. This relaunch of an old Activision franchise has racked up 30 million downloads already, so it looks to be resonating well with consumers. Mobile will likely be a big focus for the thousands of new developers who will be joining the company over the next few years, supporting the pursuit of its goal of reaching one billion MAUs.

There's a lot of competition within the gaming industry, including from tech giants like Microsoft and Tencent. That said, given Activision Blizzard is trading at a reasonable forward price-to-earnings ratio of 25, its stock can still perform handsomely for investors as the company executes on its strategies around mobile and key franchises.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.