Activision Blizzard Inc (NASDAQ: ATVI) is in the news for all the wrong reasons.
For example, there are charges of a “frat boy culture” that create a toxic workplace full of sexism and sexual harassment at the video game maker. Some people will wonder if these allegations make Activision Blizzard (ATVI) a value investment?
Activision’s stock price lends credence to the value argument. Mr. Market paid $91.50 for ATVI on 23 July 2021 and $83.85 for it on 16 August 2021. Some people will wonder if the allegations make and a lawsuit by California’s Department of Fair Employment and Housing makes Activision Blizzard a value investment.
To elaborate, the sexual harassment charges have nothing to do with the company’s business (making and marketing video games). Others will wonder, if the problems go at Activision, go beyond sexual harassment.
Notably, sex scandals are often symptoms of deeper problems, including corruption and financial crimes. Most offenders do not stop at one kind of unethical behavior.
Is Activision Blizzard a Value Investment?
People will wonder if Activision Blizzard (NASDAQ: ATVI) is a value investment because it owns several popular game franchises. Activision Blizzard’s portfolio includes World of Warcraft, Call of Duty, Diablo, Candy Crush, Hearthstone, and Overwatch.
Those games still attract millions of players. For example, Statista estimates World of Warcraft had 4.88 million subscribers in 2020. However, Statista forecasts that number will fall to 4.74 million in 2021 and 4.46 million in 2023.
In contrast, Activision claims it sold over 400 million Call of Duty games between October 2003 and April 2021. Additionally, Activision claims Call of Duty Warzone has over 100 million players worldwide.
Conversely, Overwatch had around 800,000 concurrent players in June 2021, TechACake estimates. In addition, Overwatch ranked #25 on Twitch in June 2021. Overwatch had 10 million players in the third quarter of 2020, TechACake calculates. In addition, couch potatoes watched 12.08 million hours of Overwatch play on Twitch in November 2020.
Impressively, people downloaded CandyCrush 2.7 billion times between April 2012 and 2017, Business of Apps estimates. Business of Apps estimates Candy Crush had 273 million active users in 2020. Business of Apps estimates Candy Crush generated $1.19 billion in revenues and $857 million in profits in 2020.
Does Activision Blizzard Make Money?
Hence, Activision Blizzard’s games are still popular, but does the company make money? The answer financial data provides is yes.
For example, Activision reported a quarterly operating income of $959 million and a quarterly gross profit of $1.741 billion on 30 June 2021. Those numbers rose from $749 million and $1.46 billion on 30 June 2020.
In comparison, Blizzard’s quarterly revenues rose from $1.929 billion on 30 June 2020 to $2.296 billion on 30 June 2021. Activision has experienced dramatic revenue growth over the past year.
For instance, the quarterly revenues grew by 52.81% in the quarter ending on 30 September 2020 and 19.03% in the quarter ending on 30 June 2021, Stockrow estimates. The revenues grew by 38.18% in the quarter ending on 30 June 202
Skeptics will note that Activision Blizzlard’s highest revenue growth occurred during the year the pandemic people trapped at home with nothing else to do.
Activision Blizzard generates less cash
Activision Blizzard (ATVI) is generating less cash. The quarterly operating cash flow fell from $768 million on 30 June 2020 to $388 million on 30 June 2021.
Activision can generate enormous amounts of cash. It reported a quarterly operating cash flow of $1.14 billion and a quarterly ending cash flow of $9.287 billion on 31 March 2021.
However, the quarterly ending cash flow fell from $430 million on 30 June 2020 to -$64 million on 30 June 2021. The quarterly ending cash flow rose from $1.235 billion on 31 December 2020 and $1.235 billion on 30 September 2020.
Activision Blizzard borrowed some money in 2020. It reported a quarterly financing cash flow of $934 million on 30 September 2020. Yet the company is paying off the debts. It reported a quarterly financing cash flow of -$376 million on 30 June 2020.
Activision Blizzard’s total debt grew from $2.676 billion on 30 June 2020 to $3.606 debt on 30 June 2021. Conversely, Activision’s cash and short-term investments grew from $6.339 billion on 30 June 2020 to $9.625 billion on 30 June 2021.
What Value Does Activision Blizzard Have?
Activision Blizzard (NASDAQ: ATVI) finished the pandemic with more debt and cash, but what value does it have?
The total assets grew from $20.22 billion on 30 June 2020 to $23.572 billion on 30 June 2021. Thus, Activision’s cash, revenue, income, profit, and value are growing as its stock price falls. That fits my definition of a value investment.
Plus, Activision Blizzard pays an attractive dividend. ATVI shares paid a 47₵ annual dividend on 6 May 2021. The annual dividend grew from 41₵ on 6 May 2020 and 37₵ on 9 May 2020. Overall, Activision shares offered a 47₵ Last Twelve Months Dividend a 0.55% dividend yield on 13 August 2021.
If you are looking for a growing and moneymaking company that Mr. Market cannot appreciate, Activision Blizzard (ATVI) is worth a look. This company sells a popular product to a growing market. I think Activision Blizzard proves video games can be a value investment.