In this article we discuss the 5 best app stocks to buy today. If you want to read our detailed analysis of these stocks, go directly to the 10 Best App Stocks to Buy Today.
5. Activision Blizzard, Inc. (NASDAQ: ATVI)
Market Cap: $71.3 billion
Popular Apps: Candy Crush, StarCraft, Call of Duty
Activision Blizzard, Inc. (NASDAQ: ATVI) is an entertainment and video game company based in California. The company also distributes its content to various gaming platforms globally. Activision Blizzard, Inc. (NASDAQ: ATVI) is the parent company of Blizzard Entertainment, Activision, and King. The company as a whole owns some of the most popular franchises in the gaming industry, including Call of Duty, World of Warcraft, Candy Crush, StarCraft, Destiny, etc.
In Q1 2021, Activision Blizzard, Inc. (NASDAQ: ATVI) generated over $2.2 billion in revenues, up from $1.7 billion during the same period last year. Call of Duty remained central to Activision’s revenue, accounting for 72% growth in the revenue. The franchise’s monthly active users grew by 40% year-over-year, with Call of Duty: Warzone’s MAUs reaching 100 million in Q1 2021. Blizzard’s MAUs stood at 27 million in Q1 2021, with revenue growing by 7% year-over-year. King recorded a solid Q1 with revenue growing by 22%, majorly derived by Candy Crush. It has the largest number of MAUs at 258 million.
The ATVI stock’s performance remained smooth throughout, with stock price gaining 20% in the past year. Earlier in May, the Bank of Montreal upgraded the stock to ‘Outperform’, raising the price target to $116.
Like Electronic Arts Inc. (NASDAQ: EA), Match Group, Inc. (NASDAQ: MTCH), Yandex N.V. (NASDAQ: YNDX), and Apple Inc. (NASDAQ: AAPL), Activision Blizzard, Inc. (NASDAQ: ATVI) is one of the best app stocks to buy today.
Cooper Investors released its Q1 2021 investor letter and mentioned Activision Blizzard, Inc. (NASDAQ: ATVI). Here is what the firm has to say:
“The portfolio established a position in video game publisher Activision Blizzard. As a watchlist company we have followed Activision for several years. As a reminder the role of the watchlist is to allow us to focus on a select group of companies where we seek to observe important signals around either value latency, industry trends or management behaviour that portend attractive investment propositions.
Technology can often play a disruptive role in content, however video games are a clear beneficiary of technology, both in terms of more immersive and realistic gaming experiences as well as the monetisation opportunities this creates.
In order to benefit from these trends, video game publishers must be owners of unique IP. Activision Blizzard fits this bill perfectly boasting a portfolio which includes franchises such as Call of Duty, World of Warcraft and Diablo just to name a few.
The business is run by CEO Bobby Kotick, who together with Chairman Brian Kelly purchased the foundation assets for the company for US$400k in the early 1990s. Today Activision has a market capitalisation of over US$70bn. Over the last few years Bobby and his management team have refocused resources onto their best IP, with the goal of capitalising on the aforementioned industry tailwinds.
We saw the benefits of this in 2020 with the release of Call of Duty Mobile and Free-to-Play versions (with in game micro transactions) complimenting the traditional core console game. Engagement increased materially and due to the very favourable economics of content publishing, Operating Income more than doubled for the Call of Duty Franchise. Even adjusting for the impact of lockdowns, this is a phenomenal outcome.
Activision has 3-4 key pieces of IP with which they plan to repeat this playbook over the next couple of years. If they can replicate the success of Call of Duty, even in part, we see material upside to the free cash flow power of the business. Further, revenue sources are broadening which will move the profile away from a traditional lumpy annual release cycle of the old video game model towards one of a more recurring nature. This will transition Activision from a publishing to a services business, likely attracting a higher multiple than the current mid-low 20x FCF which is broadly in line with the market. To summarise, we see significant value latency and a pathway to double digit returns over the medium term.”
