Gaming stocks tanked by 50% late last year, but now they have broken through important barriers and are on fire once again. | Source: REUTERS/Lucy Nicholson/File Photo
Activision Blizzard and Electronic Arts have suffered their share of slings and arrows. Gaming stocks can be notoriously hard to game, no pun intended. They are most akin to cyclical manufacturing stocks, oddly enough.
That’s because gaming itself goes through cycles. Sometimes content gets released and becomes a massive hit, and sometimes content just tanks.
Sometimes the content of one company will score big while the content of others will fail.
With the constant evolution of gaming platforms, gaming companies have had to scramble to keep up with these changes. Those that fail to stay ahead of the curve can see their stock prices get hammered as consumers migrate to where the latest platform content is emerging.
— #NHL20 (@EASPORTSNHL) September 5, 2019
Activision Dumps and Recovers
Up until about seven years ago, Activision’s stock was relatively moribund. But five years ago, the stock began a multi-year run that took it from $20 per share to $84, a 320% gain.
Revenues and profits exploding are the reason behind a big jump. Activision had 2015 revenue of $4.66 billion, which leapt to $6.6 billion in 2016 and has been $7.1 billion in the trailing 12 months.
Meanwhile, $881 million of profit in 2015 has exploded to $1.69 billion in the trailing 12 months.
Activision is now generating almost $2 billion annually in free cash flow,