Activision Blizzard stock hits 52-week record high
Activision Blizzard's (ATVI) shareholders are having a pretty good time. Yesterday, the company's stock hit a 52-week record high, when shares reached $61.58. Closing at $61.16, which makes up for a one-year return of 65.4 percent. To put that number into perspective: Standard & Poor's 500, a stock index based on 500 large NASDAQ and NYSE companies, had an average growth rate of only 19.5 percent over the same period.
Insiders are already expecting more. Andrew Uerkwitz, Wall Street analyst at investment bank Oppenheimer, raised his price target on the stock to $70 and called Overwatch the main reason to do so. Indeed, in a note to his clients, Uerkwitz is full of praise for the game, going so far as to call Overwatch a "generational game changer."
With Blizzard's storytelling ability, the game's diverse cast of heroes (which appeals to a new gamer demographic, especially female fans), and high expectations for the upcoming Overwatch League, Uerkwitz concludes it's the company's "most important title." This is quite a statement bearing in mind that the Activision Blizzard game pool combines heavy-hitters like the Warcraft, StarCraft, and Call of Duty franchises.
Uerkwitz details three important factors for Overwatch's present and future success. First, its design. "Its diverse cast of playable characters and cross-genre gameplay enable the game to reach a much wider audience of different skill level, taste, and personal background," Uerkwitz said.
Second, its unique content strategy. "Overwatch is known for its transmedia storytelling across comics, animated shorts, fan arts, and social media interactions with game developers. The multichannel, multimedia content strategy opens the game to higher exposure, player engagement, and more diversified revenue streams," Uerkwitz said.
And third, esports, of course.
"Overwatch has the potential to become a major esports phenomenon due to its innovative design, broad appeal, and Activision's esports strategy," Uerkwitz said. "Activision is organizing the world's first professionally run, team-owned global esports league. We expect esports to bring sustainable long-term growth of Overwatch's player base and revenues through deeper engagement and in-game content sales."
In fact, Uerkwitz thinks the game could reach an annual revenue of $700 million in the next three to five years, primarily from microtransactions. Esports, in that regard, would be "a powerful tool to promote Overwatch."
In March, a highly-cited but also heavily criticized report from Morgan Stanley put the league's potential revenue at $720 million, assuming a confident market scenario.
Uerkwitz probably refers to the report by suggesting the $700 million annual revenue, but he puts it in a different context. Only talking about revenue from microtransactions, such a number seems to be reasonable, however. For reference, in 2015, Riot Games made a reported $1.6 billion in microtransactions.
Speaking of numbers, Activision Blizzard could beat its current 52-week record high for another reason soon. After all, the company is set to debut both Destiny 2 and Call of Duty: WWII later this year. Not to mention the fact that the acquisition of Candy Crush developer King Digital Entertainment has solidly positioned Activision Blizzard in the mobile games market, which will be representing more than 50 percent of total games revenues by 2020, according to market analyst firm Newzoo.
By the looks of it, for Activision Blizzard, the sky's truly the limit. The only thing it could stumble upon is the esports community's current child of sorrow: the highly-anticipated Overwatch League. Little is known about it, yet. So little, in fact, that teams like TSM, Fnatic, Team Dignitas, and more, recently reconsidered their Overwatch plans and dropped their rosters. So yes, Overwatch could very well be, or become, Activision Blizzard's most important title. But, at least when it comes to esports, it need to step up its game.