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Activision Blizzard Is Capitalizing on This Key Asset

By Brian Withers and Toby Bordelon - Updated Jun 23, 2021 at 9:19AM

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It could have an ace in the hole with this big idea.

Companies that are able to expand their market and grow after their initial big idea can end up being great investments. Activision Blizzard (ATVI 0.19%) is one of those special companies that's done just that. Not only has it survived for over four decades, it's thrived by producing wildly popular video games and making smart acquisitions. On a Motley Fool Live episode recorded on May 12, Fool contributors Toby Bordelon and Brian Withers discuss the company's latest moves and a potential new source of revenue for this video game stalwart.

Toby Bordelon: Let's jump into the next one. Our next company is Activision. They had a great quarter, they had really solid quarter. High points on earnings, their margins are up, their operating income is up, revenue is up, cash flow, operating cash flow is way up. Monthly active users are increasing, which is always what you want to see for a company like this.

They have got some new content coming up. Overwatch 2, is highly anticipated. They are actively previewing that this week for a couple of hours at some point so that's going to be fun, people are waiting for that. A new crusade for World of Warcraft, which is actually an older piece of content that they're bringing back and redoing for the new version of the game. Two things in Diablo coming. Diablo Immortal, which is a mobile-focused platform, is a little controversial. But they're pushing Diablo out to the mobile space. Then Diablo 4 is in the works, we should see that soon.

A really interesting thing going on, [Crash] Bandicoot: On the run! Those of you who have followed the Activision for a while and played games back in the day may remember Bandicoot, that's an old Activision property. This game is actually coming out from King, which is an acquisition they did a couple of years ago, King focus on the mobile space. They're taking that old Activision property, repurposing and putting out in the mobile space. If this works, I think that gives us some potential there.

News in the C-suite, we add a new CFO, Armin Zerza. He's been with the company a while, which is good, they're promoting from within. He was the former COO, Chief Operating Officer of the Blizzard Division, and also a Chief Commercial Officer for the entire company so he's had a lot of experience. I think he's going to do a great job starting out well. They're also putting out a new ESG reports soon so look for that. It's always good to see from companies like this. But overall, great quarter, continues to be a fine company.

Brian Withers: All right, Toby, we're going to play fill in the blank.

Toby Bordelon: All right.

Brian Withers: Activision's most underrated asset is blank and why?

Toby Bordelon: I think their most underrated asset really is their old IP 9 (intellectual property), particularly old IP from Activision, which has been there for a while. Like I was talking about, Bandicoot is a great example of what they can do with that. Taking old titles, bringing them back into the new space, maybe pushing them onto mobile. If the Bandicoot thing works, maybe we'll see more of this. Maybe we'll see more of these old properties is getting new life, new sources of revenue, which will be a good thing, I think.

Brian Withers: That's really awesome.

Brian Withers has no position in any of the stocks mentioned. Toby Bordelon owns shares of Activision Blizzard. The Motley Fool owns shares of and recommends Activision Blizzard. The Motley Fool has a disclosure policy.

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