How to Buy Activision Stock in 2021

Activision Blizzard (NASDAQ:ATVI) is a leading global entertainment company, developer, and publisher of video games. It is best known for its Call of Duty, World of Warcraft, and Overwatch franchises. It is also the owner of the widely popular Candy Crush mobile game.

Activision’s ability to innovate and its track record of profitable growth has made it a darling of many investors worldwide. Over the last 5 years, Activision Blizzard stock has significantly outperformed both the S&P 500 and the Nasdaq Composite.

Thinking of buying Activision stock today? In this guide, we’ll walk you through the stock purchase process and detail some reasons why you might consider investing in Activision stocks.

3 Simple Steps to Buy Activision Stock

In a hurry? If you don’t have time to read our guide, simply follow these 3 simple steps to buy Activision stock now!

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Where To Buy Activision Stock

How To Buy Activision Stock Using eToro

Step 1: Search for Activision (ATVI) stock

Use eToro’s handy search function to find Activision Blizzard stock. In addition to stocks & tradable instruments, the investment app allows users to copy trades of pro investors. This is similar to using trading signals, but with the benefit of being able to pick from a range of individuals or funds with clearly demonstrated returns on investment.

Step 2: Click on “Trade”

When you are ready to buy or sell Activision stock, initiate the transaction by clicking on “trade”, using your “Real” portfolio. If you just want to try your hand at trading, you can also choose the free “Virtual” demo portfolio!

Step 3: Select your order type, the amount and the options you want

In the “Trade” menu, you will first be able to choose to buy (direct order if you don’t use leverage) or sell (trade via CFD) Activision stock. You can select to trade a specific number of stocks (like the example) or a dollar amount of your choice.

By default, your order is a market order, but you can make it a limit order by clicking “Rate”. When you specified your order type & quantity, you will see how much money and what percentage of your equity the trade represents.

If you wish, you can use additional options such as leverage or special order types (take-profit, stop-loss). Finally, if you trade via CFDs, you will see the daily fees displayed at the bottom.

Before deciding to trade, it is crucial that you conduct your own careful research (particularly if you’re using leverage) on any given stock!

When you are ready, click “Open Trade”.

 

Company Background

Activision Blizzard is a leading global developer & publisher of video games and entertainment. The company is a product of a combination between Activision, Vivendi Games, and Blizzard Entertainment in 2006. It is headquartered in California and listed on the NASDAQ.

Some of Activision’s most famous franchises include the Call of Duty series, World of Warcraft, Overwatch, and Diablo. In 2016, Activision purchased King Digital Entertainment, the maker of global sensation Candy Crush.

Activision Blizzard derives its revenues from 4 major sources:

1. Full games sales (purchased physically or downloaded)
2. Downloadable content (e.g. game extensions)
3. Microtransactions (mostly in-game purchases)
4. Subscriptions (particularly for World of Warcraft, a monthly subscription game)

As of December 31st, 2019, Activision Blizzard had approximately 410 million monthly active users and $6.5 billion in revenues.

Its 3 divisions (Activision, Blizzard, and King) contribute almost equally to the company’s revenues, although the Activision division is the most profitable.

Activision’s revenues are quite concentrated, however: in 2019, the largest 3 franchises (Call of Duty, World of Warcraft and Candy Crush) represented 67% of revenues, with no other franchise making more than 10% of revenues.

At the time of writing, the company had a market capitalization of $51.3 billion.

 

Activision Stock Performance

Activision Blizzard has had a strong start for 2021, up almost 14% at the time of writing.

While the company experienced operational disruptions from the coronavirus crisis, stay-at-home orders worldwide have been a blessing for video game sales. While Activision’s 2021 Q1 results are yet to come, many expect that game makers across the board will set new sales records thanks to the lockdowns.

Activision stock still trades well below its $83 peak in late 2018 but has been on the rise for over a year.

At the time of writing, the analyst consensus was mainly split between “Strong Buy” and “Buy”, with a median price target around $70.

 

Why Invest in Activision?

Activision Blizzard is one of the world’s largest video game makers, competing with other game titans like Microsoft, Sony, Electronic Arts, and Nintendo.

With approximately 410 million monthly active users across its online games (and many more offline) and the exclusive IP for Call of Duty, World of Warcraft and Candy Crush (67% of 2019 revenues), Activision’s position in the interactive entertainment market is very strong.

Deciding to invest in a stock is a personal decision that must be based on personal research. To help you in the process, below are 4 aspects that make Activision an attractive stock to buy:

1. Strong & profitable track record

In 2019, Activision made $6.5 billion in revenues, $2.3 billion in EBITDA (35% margin) and $1.5 billion in profits (23% margin). Over the period, it also generated $1.8 billion in operating cash flows (28% margin).

Its 2019 return on assets (ROA) stood at 7.6%, its return on equity (ROE) at 11.7%, and its return on invested capital (ROIC) at 16.4% – well in excess of its cost of capital.

While these figures were lower than the previous 2 years, primarily because of divestitures & lower-than-expected product sales, Activision’s margins and returns remain very healthy.

With the ongoing popularity of its existing franchises and Activision’s large cash pile ($5.9 billion) for potential acquisitions, the company’s future looks bright.

2. Growth opportunities

Activision has repeatedly demonstrated an ability to innovate and grow, organically or through strategic acquisitions.

The successful purchase of Candy Crush maker King Entertainments in 2016 underlined Activision’s desire to expand on mobile. Its success following the launch of Call of Duty: Mobile (150 million users in a few months) shows that the firm is capable to build a strong presence on the mobile segment.

In addition to its enormous cash pile for potential acquisitions, Activision has shown that its franchises can innovate and bring new games & extensions to the market to meet growing demand.

Last, the coronavirus crisis and the potential for a more socially distanced future offer Activision opportunities to reach an ever-wider user base.

3. Modest dividend & possible buybacks to complement upside

While most of Activision’s attractiveness for investors lies in its upside potential, it complements its returns with a modest but fast-growing dividend.

At the time of writing, the dividend yield was 0.6% ($0.37 per share), growing at 9% year-on-year and at 10% per year on average over the last 5 years. At <19%, this payout ratio is very sustainable, particularly in light of Activision’s strong cash flows and large net cash position.

In addition, Activision’s Board of Directors authorized a $1.5 billion buyback program over 3 years, although the company may choose not to proceed with the program.

4. Strong net cash position and cash-rich business model

Last, Activision at year-end 2019 had $2.7 billion in debt for $5.9 billion in cash, leaving it with a significant $3.2 billion net cash balance.

The company’s cash position is currently so large that it earns more interest on cash than it pays on its debt, making it highly unlikely to default.

In addition to this comfortable cash cushion, Activision’s subscription-based business model for many games (e.g. World of Warcraft) and the in-app purchases allows it to generate a lot of cash, amply covering any capital expenditures and changes in working capital.

Consequently, Moody’s rates Activision as investment-grade with a Baa1 rating, suggesting a low credit risk level. While this does not mean that Activision’s stock is not risky, it is certainly comforting that the company is unlikely to experience near-term financial distress.

 

Should I Buy Activision Stock?

As we discussed, Activision is a leader in the interactive entertainment industry, with several highly-established franchises rallying hundreds of millions of users. Consequently, investors may find Activision stock quite attractive.

Nonetheless, we cannot give you investment advice, and the decision to invest rest solely on your shoulders. Before making any investment decision, carefully review a company’s financial statements, press coverage, and understand the risks to make sure you are making the right call.

Investing is not easy and very time consuming, but it can be incredibly rewarding. For more resources, make sure to consult our stock investing and stock trading guides!

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