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A Look at Activision Blizzard’s Valuation and Growth Metrics

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Jun. 10 2019, Updated 12:15 p.m. ET

Revenue and earnings growth

Activision Blizzard (ATVI) shares have fallen 39.0% in the last 12 months and are down 2.0% since the start of 2019. However, the company has been a wealth creator for investors over the years. ATVI has risen 16.2% annually in the last five years.

The two key drivers of a company’s stock price are its potential revenue and earnings growth. Activision Blizzard rose just 5.0% annually between 2016 and 2018. Analysts expect its sales to fall 12.0% to $6.38 billion in 2019, but they expect it to return to revenue growth in 2020.

Wall Street expects the company’s sales to rise 8.9% annually between 2019 and 2021. Though its earnings are expected to fall 16.5% this year, they’re expected to rise 18.5% in 2020 and at a compound annual growth rate of 14.0% between 2019 and 2023.

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PE multiple

ATVI is trading at a forward PE multiple of 17.7x. This multiple doesn’t seem too expensive considering the company’s earnings growth rate going forward. ATVI has beaten analysts’ earnings estimates in the last four quarters. If the company can continue to beat earnings estimates, its stock price will most likely move higher.

ATVI’s earnings and revenue fall in 2019 has already been priced in, and the stock looks like a solid pick at its current level.

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