ATVI shares are waiting for tough times, but there is hope

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From the beginning of 2021 Activision Blizzard (NASDAQ:ATVI), the share lost one third of its value. Shares that started the year above $ 90 are trading at about $ 60 today.

Source: Piotr Swat / Shutterstock.com

The blame is attributed to CEO Bobby Kotick, and he also blames the protracted sexual harassment scandal ignored or disguised.

The stock’s decline plummeted as Blizzard co-host Jen Oneal, ATVI’s top-ranked CEO, abruptly resigned. She was in her position for only three months.

Kotick offered to take it a huge reduction in wages and has absolute control across his board, but Microsoft (NASDAQ:MSFT) is now “re-evaluate” your relationship with the company. This applies to exerting pressure to force Kotick.

While the scandal has bargain hunters calling ATVI stocks resold maybe it’s time to look at his business model again.

A closer look at the ATVI share

For more than a decade, video games have represented state-of-the-art client computing.

Players bought the fastest machines, s Nvidia (NASDAQ:NVDA) oz Advanced micro devices (NASDAQ:AMD) graphics cards. Gaming software has been constantly expanding the field of technology.

Game development environments such as Unity software (NYSE:U), Roblox (NASDAQ:RBLX) and the privately owned Unreal Engine Epic Games have increased development costs beyond those Hollywood blockbusters.

There are now movie franchises that are entirely game-based, e.g. Mortal Kombat in Resident Evil.

But as entertainment genres merged, technology erupted from its box. Playing games created a “metaverse” that led him to office and online interaction.

Analysts confidently talk about the metaverse market $ 1 trillion before the end of the decade. Among the layers of this market seen, the gameplay is fair edge case.

Microsoft is now operating at all levels of the new market. Facebook has become Meta platform (NASDAQ:FB) to focus on the new market.

Activision Blizzard, which a few years ago was a big fish in a gambling pond, has now found itself as a goldfish in the metaverse ocean. This means problems for ATVI stocks.

Can ATVI survive?

Given the new reality, Microsoft’s reassessment of Kotick could displace it. The company must then decide what it wants to be in the metaverse. Under Kotick, his executive talent is thin.

With a current market capitalization of $ 48 billion, Activision Blizzard is worth more than twice ViacomCBS (NASDAQ:VIAC). He’s still worth more than his main rival, Electronic Arts (NYSE:EA). But EA has a multitude of new titles comes out next year while ATVIs are postponed.

While game development budgets have risen, developers still rely on the whimsical loyalty of game players for their revenue.

Many players are unhappy with the policies Kotick has helped develop, such as charging an “add-on package” and in-game purchases that drain their bank accounts.

Growth in some new segments, such as e-sports, is slowing. The expected growth of ATVI for 2022 stems from emerging headlines late.

Bottom line

The company, built by Bobby Kotick, was the dominant publisher of video games. He had control over his market. In the new metaverse business environment, ATVI is a niche player.

Scandals and delays in games have reduced the price of ATVI to a multiple of profit to just 18. This brings value investors as map observers waiting bottom marks.

But the best reason I see for buying ATVI shares today is arbitrage.

The intellectual property of the company could look beautiful on the inside Walt Disney (NYSE:DIS). Disney could release titles it has trouble with and retain a talent for running its own metaverse efforts.

Warner Discovery might want ATVI shares to fall AT&T (NYSE:T) insert. A war of bids could even bring Cloud Czars like Meta Platforms and Amazon.Com (NASDAQ:AMZN) for fun.

This is speculative, but we could cash in on Kotick.

On the day of publication, Dana Blankenhorn held long positions in AMZN, NVDA and MSFT. The opinions expressed in this article are those of the author who are the subject of InvestorPlace.com Guidelines for publication.

Dana Blankenhorn has been a financial and technological journalist since 1978. Write to him [email protected] but tweet him on @danablankenhorn. It says Substack, Facing the future, covering technology, markets and policy.

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