Jim Cramer calls it an aggressive buy on this Mad Money series on the 3rd of November 2017 and believes it will be King of ESports. Financial Times reports that this company will be taking a huge step for a real league in 2018. This company is attracting more live views than an average NBA match. This company started out as a simple PC video games company later evolved to various platform and pushing to professional competition even Europe Football teams are investing in.
This my personal opinion and stand by it very strongly regardless of the reports. Activision Blizzard will be the face of ESports and it will grow FIVE times into a $238bn in ten years time. The current price of Activision is $60.80 as of 6th November 2017 with PE ratio of 42. I will repost this every year to track the progress. (Please see technical reference below)
The shares fell deeply by more than 7% mainly due to the report of falling subscribers even though the company smashed every target earnings. Activision Blizzard is always known to be volatile for options and spread betting traders. As investors, we should focus on the long-term hold to reap the benefits of this growth.
Activision Blizzard internally is divided into three key divisions. It’s a surprise to see how well King is contributing to this cash making machine.
If there was one word to describe this company it would be ‘As Addictive As Cocaine’
There are three key establish companies in the same industry. Activision Blizzard, EA and TakeTwo. All Americans crushing all Japanese publishers such as Konami, Capcom, Nintendo, Square-Enix and Tecmo.
The next step for these video games industry is the competition element to generate income from live competitions in stadium worldwide, media broadcast rights, live stream, blockbuster sponsorship and merchandise. Currently, China is leading the rest of the world on followers and live stream viewers. Top Prize money has been as high as USD$24 million in a major DOTA international competition 2017. Activision Blizzard is one step ahead of its competition by creating professional team leagues in various countries around the world and filled their rosters with professional players with professional sports size contracts.
At $45bn market cap, Activision Blizzard is bigger than UK Vodafone, Glencore or Vodafone.
Technical Analysis for Future Earnings
Current Financial Stats
- Currently at PE ratio of 40. This is a ratio where the market is paying for the future growth of the company. (I.E Apple is 18 – slower growth as the company is more mature)
- Current earnings estimated for $1-1.2 billion for 2017 and $1bn for 2016
- Current Earning per share is 1.47 and Current share price of $60 as of November 2017.
Scenario assumption Activision Blizzard will have Esports broadcast and gains viewers equivalent to the NBA in their Net Income of $4.5BN (2012-13 season) in the next 10 years! [My personal opinion Claim!]
Assuming we will still have the following:-
- Same PE ratio for more growth
- Same dividend percentage payout of under 1%
- Same number of shares issued
With the Net Income boosted from current $1-1.2BN plus NBA equivalent assumption to $6BN net income.
The future price of Activision Blizzard within the next ten years would be equal to $352.80 per share. This makes a market cap of $238BN.
This would make it three times the size of current Netflix!
[NOTE: The calculations above is a very rough estimate guide of the future earnings in my own personal opinion]
The future of E-Sports is here to stay and Activision Blizzard will be the King of E-Sports!
Even if we move the PE ratio down to 30, this will still make the share price equal to $264 per share.
Of course, many things can happen in the next ten years and will be filled with ups and down. At the moment Activision at the market cap of $45bn is very cheap and can be easily bought out by cash-rich giants from Apple, Microsoft, Facebook and Disney. Looking at the Broadcom bid for Qualcomm at $105BN makes Activision Blizzard very cheap for such an experience and established company with a wonderful CEO.
Final Words, I am a fan of ESports and I know the next generation kids will be streaming video games more than live sports. The $1BN take over movement by Amazon over Twitch TV already signals the industry making and believing the next generations movements. With Korea pushing out 5G in their next Winter Olympics demonstrate the evolution which will boost the ESports sector.