Heroes of the Storm

If you strip away all the hyperbole, Activision/Blizzard is significantly hurting, but not for the reasons you think. (A stock explanation)

HeroesoftheStorm 6 - If you strip away all the hyperbole, Activision/Blizzard is significantly hurting, but not for the reasons you think. (A stock explanation)

Inspired by this post, I thought I'd offer a semi-amateur investor's perspective of the recent drop in stock prices since there were a lot of misinformed statistics and poor assumptions born of it. As is the case when dealing with stocks a lot of math is involved so if that's not your thing there will be a TL;DR at the end.

To begin, the whole market is in a bit of a slide right now. The three tools to measure stock performance, the Dow Jones (aggregate of 30 large companies performance), the S&P 500 (aggregate of ~500 of the largest companies), and the NASDAQ (separate exchange which mostly tracks electronic companies prices of which Activision/Blizzard is a part of) are all down since the correction (too complicated to explain) in early October. Led by companies like Amazon, Apple, and Nvidia, the NASDAQ took a dive due to poor performance numbers in October leading to a decline in most companies on the NASDAQ as well as on the other exchanges. Here is a handy graph I've made(to scale) charting the performance of the NASDAQ and Activision/Blizzard. The NASDAQ lost 7.51% in October while Activision/Blizzard lost 16.76%. It's important to remember how correlated these two metrics are. Running a simple regression on the past 3 months of stock data shows that for every 33.08 points the NASDAQ moves Activision/Blizzard will move by 1 point. Here is the regression analysis for those interested along with a graph charting the relationship.


As you can see on the first graph I've marked off the important dates to see and it's pretty telling. While maybe the Blizzcon showing wasn't the greatest and the Diablo backlash was severe, the main drop off happened after Activision/Blizzard's subpar earnings report for the 3rd quarter on Nov. 8th which you can read here. Lotta filler but from my eyes the takeaways that are leading the decline in performance is that Destiny kinda flopped as well as the expansions. The King division of Blizzard is having the most success with monthly active users sitting around 262 million while Activision and Blizzard can only muster 46 million and 37 million respectively. HotS is not mentioned outside the intro graphic, probably viewed as a bit of a side project for investors I imagine. Blizzard actually did well by increasing their revenues mostly due to the latest WoW expansion, but overall the company was well short of their lofty goals set earlier in the year. Also a minor factor might be the heavy emphasis in the article that mobile games like Hearthstone and Candy Crush are really good returns on investment and that they are "Investing in mobile releases for Activision and Blizzard franchises" and "Many top mobile games are based on IP originally created for console and PC". Diablo Immortal backlash a few days earlier might have made this taste a bit sour to investors thinking, "If mobile is so great than why are you getting booed for releasing mobile games. Seems like people don't want it. I might take my money elsewhere."

Read:  Wednesday Esports Discussion - February 13

Since then the real drop has happened, going from 65.09 to 47.88 today. A drop of 35.52% from 3 months ago and 42.58% at the 3 month low. The NASDAQ in the meanwhile has also been hurting down 11.5% in the past 3 months. This is not nearly enough to explain the Activision/Blizzard drop though it can, as the regression earlier pointed out account for roughly 1/3rd (11.5/35.52). That's pretty much it. Just wanted to give y'all an accurate understanding of what is happening. Diablo Immortal and Blizzcon did not single-handily cause Activision/Blizzard to drop 44% like the previous article said though it probably didn't help.

TL;DR: Blizzard is down ~35% from 3 months ago primarily due to a poor earnings report coupled with a slide in the market, not because of Blizzcon and Diablo Immortal though that may have caused some qualitative worrying in investors when placed in coordination with the upcoming "mobile strategy" Blizzard is unfolding.

Original link

© Post "If you strip away all the hyperbole, Activision/Blizzard is significantly hurting, but not for the reasons you think. (A stock explanation)" for game Heroes of the Storm.

Top-10 Best Video Games of 2018 So Far

2018 has been a stellar year for video game fans, and there's still more to come. The list for the Best Games of So Far!

Top-10 Most Anticipated Video Games of 2019

With 2018 bringing such incredible titles to gaming, it's no wonder everyone's already looking forward to 2019's offerings. All the best new games slated for a 2019 release, fans all over the world want to dive into these anticipated games!

You Might Also Like

Leave a Reply

Your email address will not be published. Required fields are marked *