Whether it is escaping reality or virtual socializing in 2021, video games provide a way to meet those needs.
Few companies, in this industry, are as renowned as Activision Blizzard (NASDAQ: ATVI). With all its popular releases, odds are that you own one or more of its games on your preferred gaming platform.
How to Buy ATVI Stock
Are you looking to invest in the video games industry? This guide will show you how to buy stocks, including ATVI.
- Pick a brokerage.
If you are buying stock for the first time you will need to pick a brokerage — a regulated financial company that buys and sells shares on your behalf. One of the benefits of modern technology is that you do not have to rely on phone calls and broker agents anymore. Investing in stocks is safe, secure and convenient through web platforms or phone apps. If you’re starting out with a modest sum, consider a $0 commission cost account.
As a potential ATVI buyer, you need an account with access to the Nasdaq exchange. Any broker from our list of best brokers is suitable for that purpose. - Decide how many shares you want.
After opening an account, you’re ready to buy the shares. The number of shares depends on the amount of capital you are investing and the share price. As ATVI currently trades at $92, $100 will buy you a little over 1 share. If you’re planning to invest smaller sums periodically, consider picking a broker with fractional share ownership.
- Choose your order type.
To buy the stock, you need to instruct your broker on how to do it. As there are different ways to do it, you need to understand the basics before investing. As many brokers offer demo accounts, you should use them to practice before placing real money orders.
Market order: A simple order that instructs your broker to purchase a number of shares regardless of the price. You might get a slightly worse price but your order will be filled faster.
Limit order: This is a buy/sell order that will execute only at a specified price (or better). Limit orders offer an advantage in the highly volatile or low liquidity environment.
Stop-loss order: This is an order that protects a position. If the price moves beyond a certain level, this position will automatically trigger to close the position and preserve the capital.
Stop-limit order: Like stop-loss order but with an added limit to the price. Instead of instant execution, the order will only use the limit price or better.
Bid: This is the greatest price buyer is willing to pay at the moment.
Ask: The ask is the smallest price at which the seller is willing to sell at the moment.
Spread: The difference between the bid and the ask. For example, if the bid for ATVI is $91 and the ask is $91.05, then the spread is $0.03. A smaller spread is an indicator of a liquid market — it is cheaper to enter a position. - Execute your trade.
Once you execute the trade, it will be sent to your broker. You will see funds deducted from your account and the broker will buy the shares. Keep in mind that you do not own the shares from the moment you send the trade to the broker — but from the moment your trade is filled on the market. The details will be on your broker statements.
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ATVI Stock History
Activision Blizzard is an American video holding game company formed in 2008 through a merger of Activision and Vivendi Games. It owns some of the largest franchises in video game history, including World of Warcraft and Call of Duty.
The company is listed on the Nasdaq exchange under the ticker symbol ATVI. It has been a part of the S&P 500 index since 2015.
Currently headquartered in Santa Monica, California, the company has 9,000 employees and a market cap of $70 billion.
Pros to Buying ATVI Stock
- Rising e-sports popularity: This niche has been transforming into a full industry in its own right. The market is projecting a 10% compound annual growth rate to 2023 — on the pace to double up in the 6-year period. While the U.S. lags behind China in total revenue ($385 million vs $252 million), Activision Blizzard owns Overwatch, the most viewed game on Twitch and YouTube.
- Record video game sales: Video game sales are breaking the records. Year-to-year sales for January were up 42% at $4.71 billion, while February sales brought year-to-date spending to record $9.3 billion. While this sector is benefiting from the ongoing pandemic, it shows no signs of slowing down.
- Diverse franchise portfolio: ATVI has been developing and publishing some of the best-selling games in the world. It runs a balanced portfolio across many platforms and genres. Some of its most known brands are Call of Duty, Warcraft, Starcraft, Diablo, Candy Crush Saga and Overwatch.
- Healthy balance sheet: The company has a very nice-looking balance sheet. Net cash assets equal $5.2 billion, with a free cash flow of $2.2 billion. The company also reduced debt to equity from 50% to 24% over the last 5 years. Although not impressive, Activision Blizzard still pays a 0.52% dividend.
Cons to Buying ATVI Stock
Underperforming the industry: Although the stock made a significant recovery (+74% from March 2020), it is lagging the U.S. entertainment sector by almost 40%. Revenue growth forecasts at 7.8% are also unimpressive versus 15.4% for the industry overall. Also, ATVI has a forward P/E ratio of 25.25, a premium over the industry's average forward P/E of 23.56.
Questionable short-term growth: Activision Blizzard revitalized its balance sheet in the last few years due to good performance. Yet, it is obvious that the sector is currently flying high on the tailwinds of the pandemic. The fair value of the company (and industry at that) in the post-pandemic world remains unknown.
Low morale: When it comes to employee treatment, the company is rarely making good headlines. From the 800+ laid off in February 2019 (despite the record-setting revenue) to 190 employees laid off in the pandemic, Activision Blizzard is not afraid to wield the sword of capitalism and mercilessly cut whatever seems redundant at the time. CEO Robert Kotick (the highest-paid executive in the industry) is set to receive a bonus of up to $200 million in 2021. On the other hand, a laid-off employee receives a $200 gift card for Battle.net.
Lack of innovation: Although successful, Activision Blizzard game franchises are fairly old.
Despite the enormous profitability of these brands, sustainable growth requires innovation. No matter how successful the product, no company can forever rest on its laurels.
About Stjepan Kalinic
Forex, Equity Analysis, and Financial Education