When it comes to technology, it’s very hard to find undervalued companies. Tech related companies are mostly driven by market hype and speculation, which is why their valuations are often on the extremes. However, a classic exception to this theory is Activision Blizzard, Inc. (NASDAQ:ATVI). Its shares have risen by nearly 35% over the last six months, yet they appear to be undervalued with a forward P/E of 14. Its shares are trading near their 52-week highs, but I believe that its shares could still head north.
Black Ops II
This upside is mainly driven by three reasons. With months of waiting, amongst a growing fanbase, the launch of Black Ops II propelled its sales to record levels. Its latest edition raked in $1 billion in revenue in just 15 days, and it’s featured among the top downloaded games even after six months of its release. As clear as it gets, Call of Duty has become one of the most successful franchises in the history of gaming.
But that was hindsight. Activision Blizzard, Inc. (NASDAQ:ATVI) just unveiled a content pack for its latest Call of Duty. Its “Vengeance” pack is available for $15, which is around one third the price of the game itself. The pack features four multiplayer maps, a special gun and zombie add ons. With a huge fanbase of over 15 million gamers, Activision Blizzard, Inc. (NASDAQ:ATVI) is estimated to rake in revenues around $50-$75 million, just from the sales of its multiplayer pack.
A new addition
The third reason is that Activision Blizzard, Inc. (NASDAQ:ATVI) plans to launch its “Call of Duty: Ghosts” on November 5. For the last couple of months, gamers and investors have speculated that Activision Blizzard, Inc. (NASDAQ:ATVI) won’t be able to retain its growth momentum. This is because Call of Duty has already delivered one of the best first person shooter, or FPS, experiences out there, and the franchise will have to come up with something completely new to interest new and existing gamers.
But one of Activision Blizzard, Inc. (NASDAQ:ATVI)’s developers recently stated that Call of Duty’s upcoming “Ghosts” will have a dual screen gameplay. Apart from extended displays, the second screen will involve a secondary gameplay/story, which will keep gamers on their toes (most of the time). This seems like something new, and might give Activision an edge over its rival, Battlefield 4. Sounds like rising revenues!
To lure early birds, Activision is giving away a free map on pre-orders. The game is available for pre-orders at a price tag of $59.99.
One more thing to consider is that Microsoft Corporation (NASDAQ:MSFT)’s Xbox One and Sony Corporation (ADR) (NYSE:SNE)’s Playstation 4 will be available in the next few months. So, by the time these consoles become available, there will be only a handful of games to flaunt the full extent of their powerful GPUs. Since “Call of Duty: Ghosts” happens to be one of those few titles, the lack of variety should contribute to higher unit sales of “Ghosts.”