<p>As a typical nerdy child, I remember my parents screaming at me to go out and do something physical. Ah, being a child during the new coronavirus year! In this paradigm, I could easily have told them that I am doing my civic duty by playing video games. Undoubtedly, that thought process came to the minds of the management team that runs Activision Blizzard (NASDAQ: ATVI). Despite a brief decline in March, the Activision Blizzard stock quickly shook again.
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This should not surprise anyone who has not shielded themselves from the rest of the world who hunted in their doomsday bunker.
When Covid-19 began destroying the United States, most states eventually issued home orders, which only allowed exceptions for significant efforts. Obviously, all forms of entertainment – except for going out for fresh air and exercise – are not necessary. Therefore, investments in home entertainment such as the Activision Blizzard share experienced upward momentum.
Before the corona virus, I was generally a boom in the video game industry. This is a segment that has evolved from a hobby to a truly professional industry. Personally, I can convey how Sony’s (NYSE: SNE) PlayStation division probably saved the consumer technology company from ruin during the great recession. And with popular entertainment such as movie theaters closed, those consumer dollars are likely to move to Activision Blizzard shares.
So I should be gung-ho on ATVI, right? It’s complicated.
While Activision has hugely popular franchises like the Call of Duty series, my research shows that these games are losing their popularity. In that case, it could mean that rivals like Electronic Arts (NASDAQ: EA) could have an opportunity to steal vital market share. That’s why you might want to wait for it.
Consumer Sentiment and Activision Blizzard Stock
When you look at what has made ATVI so successful over the years, you can not ignore the Call of Duty franchise. And an important part of what drives Call of Duty is its realistic – read violent and gruesome – game.
Last November, I argued that Activision began to move away from this theme and introduced fantasy and science fiction elements to its flagship franchise. Unfortunately, the sales results confirmed that their decision did not work. But when they gave consumers what they wanted, ATVI got its mojo back.
But getting mojo back meant sales growth towards a lower point of comparison. When you look at the ten best-selling Call of Duty games, you will quickly notice that the early 2010s represented the top of Activision.
In addition, as ATVI’s Call of Duty games increased toward peak popularity, other manufacturers released video games with violent themes such as “Grand Theft Auto” and “Left 4 Dead.” But as the 2010s rolled into town, video game makers’ most popular game titles – according to respected sources such as Time, Wired and Cnet.com – increasingly featured strategy and fantasy games.
This does not mean that the Activision Blizzard share became irrelevant in the last decade. Nor did the gaming companies fail to release violent titles. As Hollywood knows, blood and blood pressure are simple income makers – so fictional serial killer Jason Vorhees has about 800 sequels to his name.
But over the years, consumers have increasingly turned to games where violence is not the main selling point. As further proof, look at the relationship between Call of Duty sales and time. If I did not know better, I would assume that as consumers mature, their predilection for violence decreases.
This is not very good news for Activision Blizzard shares.
More violence going forward?
Earlier this month, I discussed 7 gun stocks to buy during the coronavirus pandemic. As you probably know, the fear of social unrest has increased arms sales to record levels. These arms buyers simply react instinctively to what we know: desperate people do desperate things.
More worryingly, without a job, many people have nothing to lose.
As a segue, I find it interesting that Call of Duty games grew towards top popularity in the wake of the great recession. Were these people carried by a similar desperation that we see now and act out their violent fantasies through video games? Now this is a survey I would like to see! But since we do not know, I think it’s too early to make any final statements regarding the Activision Blizzard share.
Instead, if you’ve bullish, I’m going to take a small position now but keep the powder cover dry. Another factor that I see as relevant is the lack of sporting events. It can drive enthusiasm for EA shares, which can leave ATVI temporarily in the shadows.
But I know that video games are natural stores, especially during quarantine. It seems cynical that violence can return. In that case, it would help the Activision Blizzard stock.
Josh Enomoto, a former senior business analyst at Sony Electronics, has helped broker larger contracts with Fortune Global 500 companies. In recent years, he has delivered unique, critical insights for the investment markets, as well as for various other industries, including law, construction management and healthcare. As of this writing, he is a long SNE stock.