I'll be the first to tell you that I am not a computer gamer. I never even mastered Super Mario Brothers as well as my children did. I will admit that the gaming industry is maturing and the average age of a gamer is increasing as the number of candles on the gamers birthday cakes also increases. The graphics of the games today is beyond what I ever imagined. At the center of this industry is Activision Blizzard (NASDAQ:ATVI). Not only is there a cult following for their game offering but those who follow the stock have similar blinders. The recent dip in price is a buying opportunity as this graph provided by Barchart shows:
Activision Blizzard, Inc. publishes online, personal computer, console, handheld, and mobile games of interactive entertainment worldwide. The company develops and publishes PC-based computer games and maintains its proprietary online-game related service, Battle.net. The company also develops, markets, sells, and supports role playing action and strategy games, as well as develops, hosts, and supports its online subscription-based games in the MMORPG category.
In addition, it involves in the distribution business that provides warehousing, logistical, and sales distribution services to third-party publishers of interactive entertainment software and manufacturers of interactive entertainment hardware. The company markets its products to direct mass-market retailers, consumer electronics stores, discount warehouses, and game specialty stores through direct basis, third-party distribution, and licensing arrangements. Activision Blizzard, Inc. is headquartered in Santa Monica, California. (Yahoo Financial profile)
Factors to consider:
Barchart technical indicators:
- Barchart uses technical indicators ranging from 7 days to 6 months to analyze a stock's current price momentum and direction
- Recently the sell signals are weakening
- Barchart technical hold signal
- Trend Spotter sell signal is weakening
- Trading below its 20, 50 and 100 day moving averages
- 14.51% off its recent 1 year high
- Relative Strength Index 46.04% and rising
- Barchart computes a technical support level at 12.18
- Recently traded at 12.32 with a 50 day moving average of 12.66
- In the past 6 months the stock has held up well against the Value Line Index of 1700 stocks:
- 18 Wall Street brokerage firms follow the stock and have assigned 22 analysts to run the numbers
- Analysts think the revenue will decrease by 10.80% this year but increase by 6.70% next year
- Earnings forecasts remain positive with an increase of 8.90% expected this year. The might be followed by another increase of 11.60% next year and continue by an annual rate of increase of 13.87% for the next 5 years
- These numbers resulted in 9 strong buy, 10 buy, 3 hold and no under perform or sell recommendations to clients
- The P/E is 15.20 which is just slightly higher than the markets P/E of 13.5
- This is not a dividend stock but its 1.36% dividend is about 25% of estimated earnings and lower than the market's dividend rate of 2.40%
- Analysts have noted that the company's offerings of new products are much slower than in past years
- The company is putting a lot into Call of Duty: Modern Warfare 3 which is expecting major holiday sales
- The company is looking to move from distribution of their products through retail outlets to direct on-line distribution via the Internet. Time will tell if this major marketing shift will be a winning combination.
General investor interest:
- When I look at the individual investor interest on Motley Fool I find 7,010 reader expressing an opinion on this stock
- Those voting think the stock has a 97% chance of beating the market
- The more experienced and savvy All Stars also voted 97% for the sale result
- Fool notes that of 36 articles about the stock 94% have been positive
- At odds on this stock are Jim Cramer with a sell and Tobin Smith with a buy
Competition is always there and it is important to see how the stock's price has compared over the last year to its competition. While ATVI has been up 5% in the past year Electronic Arts (ERTS) is up 53%, Take-Two Interactive Software (NASDAQ:TTWO) up 27% and Sony (NYSE:SNE) down a whopping 49%:
Summary: If you've been looking at Activision Blizzard for some time now is the time to enter on this dip. I like the new and enhanced products and the new direct on-line distribution plan. The analysts numbers look good. I recommend if you can acquire below 12.50 you also enter a stop loss at the lower 14 day turtle channel which is presently at 11.50. There is a good chance you can make 22% - 26% annual for the next 5 years is the numbers come to pass.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.