TheQuartering [7/27/2021]
It’s falling hard.
Share prices of Activision Blizzard (NASDAQ:ATVI) dropped sharply after reaching a high of $104 earlier this month. Coincidently, the game producer held its annual BlizzCon event on Feb. 19-20 to discuss the latest developments with Blizzard titles, including Hearthstone, World of Warcraft, Overwatch, and Diablo.
Some investors anticipated hearing new updates at BlizzCon about the development of Diablo 4 and Overwatch 2, especially some kind of release timeline. But no release dates were issued for these titles, which means these titles are coming in 2022 at the earliest, and perhaps not until 2023.
Here are two reasons why this could be causing the stock to fall and why Activision Blizzard shares may not be the best value among top gaming stocks right now.
The stock price advanced 56% in 2020 and continued to rise leading up to BlizzCon. Investors have had a lot to digest, such as last year’s record business performance, along with the near-term prospects for more growth from new games in the pipeline.
Although the timing of new releases doesn’t change the long-term value of the business, stocks tend to move based on the presence, or absence, of near-term catalysts that can keep revenue and profits marching higher. When there is a lack of near-term visibility for growth, that can trigger a stock price correction.
Without Diablo 4 or Overwatch 2 releasing this year, Activision Blizzard will be more dependent on continued momentum in Call of Duty, which generated 36% of the company’s total bookings in 2020, in addition to content updates across other franchises. Blizzard announced several new content updates coming later this year, including a new expansion for Hearthstone and a new update for World of Warcraft: Shadowlands.
The release of Diablo 3 in 2012 broke sales records for PC games at the time. While we won’t get to see Diablo 4 try to go for another sales record any time soon, Blizzard is releasing a remastered version of Diablo 2 on PC and consoles later this year, which will serve as a bridge until the next release. The mobile version, Diablo: Immortal, is expected to launch later this year, too.
Still, these content updates for existing games are not expected to move the needle as much as a new game launch, which leads to the next reason why the stock is down.