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Why Investors Should Be Optimistic about ATVI’s Long-Term Growth

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Dec. 4 2020, Updated 10:53 a.m. ET

Partnerships with NetEase and Tencent

Activision Blizzard (ATVI) has a long-standing partnership with China’s (FXI) NetEase (NTES) that has now spanned 11 years. ATVI has expanded this partnership to publish games in China until January 2023. China is the largest gaming market in the world and continues to grow quickly.

ATVI has also partnered with Tencent for Call of Duty Mobile in China. These partnerships will give Activision Blizzard access to over 700 million Internet users in the country. They should also help stall the decline in the company’s number of monthly active users and increase user engagement, which can be monetized later.

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Global esports spending could reach $1.1 billion in 2019

Fortnite has taken the gaming world by storm with its battle royale mode. Peer Electronic Arts (EA) has also ventured into the battle royale genre with Apex Legends. However, Activision Blizzard is focused on mobile gaming and esports.

Global esports spending is estimated to increase 26% to $1.1 billion this year. ATVI is a market leader in this space, as it was one of the first companies to launch an esports league with Overwatch. ATVI’s Overwatch League now has 20 teams.

Wedbush optimistic about Activision Blizzard

Investment bank Wedbush expects ATVI to outperform analysts’ estimates in 2019. It expects the company to post EPS of $2.40 this year, ~10% higher than analysts’ average estimate of $2.20. Wedbush has also estimated sales of $6.7 billion for the company, higher than the average estimate of $6.4 billion.

Wedbush analyst Michael Pachter said, “Activision Blizzard is well-positioned to deliver significant outperformance in 2019 and outsized growth in 2020. Upcoming catalysts may include: Upcoming game announcements and launches, continued digital revenue growth, growth in esports viewership, contribution from King advertising, quarterly results, and guidance.”

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