Activision is a leading global developer and publisher of interactive entertainment content and services. This content is pertained to video game consoles, personal computers, and mobile devices. Activision also runs their own esports leagues and creates film and televised content. Activision is in a diverse market but holds a heavy lead in terms to its direct competitors like Rockstar, Disney Interaction, Ubisoft, EA, and Bandai Namco. Activision surpassed $7.5 billion dollars in 2018 and the next closest was EA at $5.5 billion, while the rest slightly fall behind EA. In this market, Activision seems to be the top dog while the rest are fighting for 2nd, 3rd, and 4th place. Activision has many business prospects that include fortune 500 companies such as Sony, Microsoft, Nintendo, Google, and their Chinese partner, NetEase.
To determine the weighted average cost of capital for Activision I used the CAPM formula using calculations from previous investigations. The CAPM was 3.18% which was used in finding the WACC which came out to 10.14%. Using our DCF template we were able to calculate projected outcomes for Activision for 2019, 2020, 2021, 2022, and 2023. Activision as a whole is projected to continue to grow slightly with a decrease in output of one of their big three project lines, Blizzard. The calculated per share price was $54.10, while their current share price is 51.06. If someone is looking to make a small profit, this would be one a person would look into, however, not very many people would be looking to make that little amount of money so I would not recommend purchasing this stock due to its small intuition of an increase in share price.
Upon the sensitivity analysis, it shows any type of dramatic increase in profit percentage for a given year would not be significant to the share price. The main reason for the small change in share price would be due to its significant weighted average per capital. The .1014 weighs very heavily into the company and stunts any type of significant growth. However, if the WACC were to drop to even a mere 5%, the share price would have a much larger growth that would increase its share price at least 25%. Assuming the WACC numbers are accurate however, this would be highly unlikely and would only result in a drastic change for the company that may be unforeseeable to anyone in the public.