ATVI – Market expectations are for continued ROA compression, and management is concerned about their product pipeline, mobile gaming, and large franchise growth

• Activision Blizzard, Inc. (ATVI:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) Earnings, with a 20.1x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about the strength of their product pipeline, their ability to extend their franchises to mobile, and sustain community growth in Overwatch
• Specifically, management may be exaggerating the strength of their product pipeline, the potential of cloud gaming platforms, and their ability to capitalize on growth opportunities by investing in their biggest franchises. In addition, they may be concerned about their ability to extend their franchises to mobile, their financial flexibility and discipline, and King’s ability to remain an innovative leader in mobile gaming. Moreover, they may be concerned about the sustainability of World of Warcraft user engagement, and exaggerating the quality of their content lineup and the potential of Hearthstone’s newest expansion. Finally, they may lack confidence in their ability to sustain Overwatch community growth and maintain Candy Crush Friends monetization.