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Activision Blizzard stock in 5 years: Can ATVI shares perform if Microsoft walks away from takeover?

By Rob Griffin

Edited by Vanessa Kintu

15:07, 9 November 2022

Activision Blizzard logo on smartphone screen. A frame from the Call of Duty on the background.
Activision Blizzard’s franchises include Call of Duty, World of Warcraft and Diablo Photo: Sergei Elagin / Shutterstock

Shares in video game publisher Activision Blizzard (ATVI) are expected to rise over the coming months ahead of its planned $68.7bn takeover by Microsoft. The US company, which owns popular global franchises such as Call of Duty and World of Warcraft, agreed to the $95-a-share approach earlier this year.

Analysts believe the stock price could exceed $90, but what will be the ATVI 5 year stock forecast if regulatory scrutiny forces Microsoft to walk away with the deal?

Here we consider the outlook for Activision Blizzard stock in 5 years, take a look at its recent results, and reveal what analysts predict may happen.

What is Activision Blizzard?

The American video game company is based in Santa Monica, California, and was founded in July 2008 through the merger of Activision and Vivendi Games.

The company’s franchises include Call of Duty, World of Warcraft and Diablo, as well as the hugely popular Candy Crush Saga and Skylanders. Four years ago, Activision Blizzard Esports launched the Overwatch League, the first major global professional esports league with 12 city-based teams around the world.

As of November 2022, Activision Blizzard had a market cap of $57.06bn. This made it the world’s 247th most valuable company. It was also the fourth largest video game business and the second largest esports player, behind Tencent.

Earlier this year, Microsoft announced it would acquire Activision Blizzard to “bring the joy and community of gaming” to everyone, across every device.

ATVI stock price analysis

The proposed Microsoft takeover certainly boosted the Activision Blizzard stock price, which rose from $63 to $82.31 in the wake of the announcement.

However, the past six months have been more volatile. The stock price has ranged between $70 to $80, largely dependent on the regulatory views of Activision Blizzard, which have achieved trailing returns of 9.92% over the past three years, comfortably ahead of the 6.79% of the industry.

The Microsoft deal

Back in January 2022, Microsoft announced plans to acquire Activision Blizzard to accelerate the growth in its gaming business across mobile, PC, console and cloud. The acquisition was reported to be for $95.00 a share, in an all-cash transaction valued at $68.7bn, inclusive of Activision Blizzard's net cash.

Upon completion, Microsoft was expected to become the world’s third-largest gaming company by revenue, behind Tencent and Sony. The deal, which was approved by the boards of directors at both Activision Blizzard and Microsoft, is expected to close in Microsoft’s fiscal year ending 30 June 2023.

Regulatory stumbling blocks

However, there are potential stumbling blocks. In September 2022, the UK’s Competition & Markets Authority referred the deal for an in-depth investigation. This was due to concerns that the arrangement may result in a “substantial lessening of competition” within the marketplace.

Microsoft has claimed the regulator relied on objections from rival Sony in its decision to refer the agreement for further analysis. In a statement, it noted suggestions that Microsoft could withhold Activision Blizzard content – in particular, Call of Duty – from Sony’s PlayStation.

However, Katie Cousins, an equity research analyst at Shore Capital, is unsurprised by the level of scrutiny and believes Sony has every right to be wary, she told Capital.com:

Call of Duty is a major franchise, loved by many players across multiple platforms and if Microsoft takes ownership, that’s a lot of power in its hands.”

Latest earnings report

Activision Blizzard’s net revenues for the quarter ended 30 September 2022 were $1.78bn, down from the $2.07bn for the same period last year. The company also generated $257m in operating cash flow for the quarter, compared with $521m for the third quarter of 2021.

In a statement, Bobby Kotick, Activision Blizzard’s CEO, reaffirmed his expectation that the transaction would close in Microsoft’s current fiscal year ending June 2023:

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“We look forward to continuing to release epic entertainment in service of our global community of players as a part of Microsoft, one of the world’s most admired companies.”

Activision Blizzard stock in 5 years: What next for the price?

Activision Blizzard [ATVI] 5-year stock price chart

So, what is the Activision Blizzard stock forecast in 5 years? ?

As of 8 November, the stock was a ‘hold’, based on 19 analyst ratings compiled by MarketBeat. Six had it as a ‘buy’, with the remaining 13 recommending ‘hold’.

The consensus was ATVI could hit $92.78, representing a potential upside of 30.49% over the $71.10 closing price on 7 November, 2022. The highest prediction was $100, while even the lowest forecasted a 4% rise to $74.

Activision Blizzard is a ‘moderate buy’ based on the views of six analysts compiled by TipRanks, with the average price target being $93.17. The highest forecast was $95 and the lowest $84. 

According to Wallet Investor, ATVI stock is currently “an acceptable long-term (one year) investment”, according to the algorithmic forecasts of. However, the site’s Activision Blizzard stock 5 year forecast predicted the price could reach $102.61 by November 2027. 

How do analysts view the stock?

What are the Activision Blizzard stock predictions of analysts? 

Neil Macker, senior equity analyst at Morningstar, expected the deal with Microsoft to be approved

However, he warned in a recent note that it may not get completed until the second half of 2023 as various jurisdictions continue to scrutinise the deal:

“We are maintaining our fair value estimate of $92, which balances our standalone valuation (also at $92), the acquisition value of $95 a share roughly a year from now, and the potential for regulatory intervention.”

Macker pointed out the company had $10.5bn of cash and equivalents, and $3.6bn of long-term debt, as of June 2022. It also generated average free cash flow of $2.1bn over the last three years.

“The company’s video game sales are very profitable, and normalised free cash flow over the past few years has averaged 20% of revenue.”

He also noted there were a lot of positives with Activision Blizzard, even if Microsoft ended up walking away from the proposed takeover.

“We expect the company will easily be able to meet its debt obligations, pay an annual dividend (increased to $0.47 in 2020 from $0.41 in 2019), and fund the development of new titles and franchises even if the Microsoft deal falls through,” he said.

Macker also believes Activision Blizzard is well-placed to “consolidate its leading position” by developing compelling new versions of its existing franchises.

“We expect Activision to continue to benefit from ongoing console demand, the ongoing revitalisation of PC gaming, and the growth in the mobile market via King,” he added.

When looking at any Activision Blizzard long-term stock forecast, keep in mind predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading. And never invest or trade money you cannot afford to lose.

FAQs

Where will ATVI stock be in 5 years?

No-one knows for sure where the stock will be in 2027. The algorithmic forecasts of Wallet Investor predicted the price could reach $102.61 by November 2027 but this is a long time and the stock may be affected by a variety of factors.

Will Activision Blizzard stock go up or down?

This will depend on various factors. The consensus view of 13 analysts compiled by MarketBeat is it could hit $92.78 – 30.49% up on the $71.10 closing price on 7 November, 2022. However, the Activision Blizzard stock projections of analysts may be incorrect.

Is Activision Blizzard a good long-term investment?

Whether Activision Blizzard will be a good investment depends on your overall portfolio, goals, attitude to risk, and your opinion of the company itself. It’s essential to carry out your own research of the business and its broader sector in deciding whether it will be an attractive stock to own. Past performance is no guarantee of future results. And never invest money you cannot afford to lose.

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You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
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