Stock Analysis & Valuation Activision Blizzard Inc (AIY.DE)

• Previous Close: €89.50
• Sector Valuation Confidence Level: Low

Valuation method	Value, €	Upside, %
Artificial intelligence (AI)	58.60	-35
Intrinsic value (DCF)	51.70	-42
Graham-Dodd Method	12.60	-86
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

Activision Blizzard Inc. (AIY.DE) is a leading global developer and publisher of interactive entertainment content, headquartered in Santa Monica, California. Operating in the Media & Entertainment sector under the broader Technology industry, the company develops and distributes games across multiple platforms, including consoles, PCs, and mobile devices. Its key segments include Activision Publishing, known for blockbuster franchises like Call of Duty; Blizzard Entertainment, a powerhouse in PC gaming with titles such as World of Warcraft; and King Digital, a dominant player in mobile gaming with Candy Crush Saga. Additionally, Activision Blizzard engages in esports through Major League Gaming (MLG) and content production via Activision Blizzard Studios. With a diversified portfolio and strong intellectual property, the company maintains a robust presence in the $200+ billion gaming market. Its strategic focus on live-service games, cross-platform play, and digital monetization positions it well in the evolving gaming landscape.

Investment Summary

Activision Blizzard presents a compelling investment case due to its strong portfolio of iconic gaming franchises, recurring revenue from live-service games, and leadership in mobile gaming through King Digital. The company reported €7.53 billion in revenue and €1.51 billion in net income for FY2022, with healthy operating cash flow of €2.22 billion. However, risks include regulatory scrutiny (particularly regarding its acquisition by Microsoft), reliance on key franchises like Call of Duty, and integration challenges post-acquisition. The lack of dividends may deter income-focused investors, but growth potential in mobile and esports remains significant. The stock’s low beta suggests relative stability compared to the broader tech sector.

Competitive Analysis

Activision Blizzard holds a competitive advantage through its deep intellectual property portfolio, including Call of Duty, World of Warcraft, and Candy Crush, which drive recurring engagement and monetization. Its multi-platform strategy (console, PC, mobile) diversifies revenue streams and mitigates platform dependency. Blizzard’s strong PC gaming community and King’s dominance in casual mobile gaming provide additional moats. However, competition is intense, with rivals like Electronic Arts and Take-Two investing heavily in live-service models and exclusive content. Activision’s reliance on a few key franchises poses a risk if player engagement wanes. The company’s scale and resources allow for high-budget game development and marketing, but smaller, agile competitors like Roblox and Epic Games are disrupting the market with innovative monetization and metaverse initiatives. The pending Microsoft acquisition could further strengthen its cloud gaming and subscription offerings, potentially widening its competitive edge.

Major Competitors

• Electronic Arts Inc. (EA): EA is a major competitor with strong sports franchises (FIFA, Madden NFL) and live-service games like Apex Legends. It competes directly with Activision in shooter games and has a robust EA Play subscription service. However, EA lacks a significant mobile gaming presence compared to King’s dominance.
• Take-Two Interactive Software Inc. (TTWO): Take-Two owns Rockstar Games (Grand Theft Auto, Red Dead Redemption) and Zynga (mobile gaming). Its premium AAA titles compete with Activision’s blockbusters, but its mobile segment is less profitable than King’s. Take-Two’s slower release cycle contrasts with Activision’s annualized franchise updates.
• Ubisoft Entertainment SA (UBI.PA): Ubisoft is known for open-world franchises like Assassin’s Creed and Far Cry. It competes in action-adventure genres but lacks Activision’s scale in shooter games and mobile. Ubisoft’s recurring revenue from live-service games is growing but less established than Activision’s.
• NetEase Inc. (NTES): NetEase is a key player in mobile and PC gaming, particularly in Asia. It partners with Blizzard for Chinese distribution of games like World of Warcraft but also competes with its own titles. NetEase’s strength in China contrasts with Activision’s Western-focused portfolio.
• Roblox Corporation (RBLX): Roblox dominates the user-generated content and metaverse gaming space, appealing to younger audiences. It competes for engagement time but operates in a different niche than Activision’s premium games. Roblox’s platform model poses long-term disruptive potential.