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Bilifuduo (98.28)

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November 08, 2011 – Comments (5) | RELATED TICKERS: ATVI

Activision just released Call of Duty: Modern Warfare 3, and despite all the smack talk I'm hearing about how Battlefield 3 has better graphics, I would like to point out that Modern Warfare 3 still has better gameplay and is a better game overall. 

 

Now, with that out of the way, let's look at Activision the company. It just reported that it expects 2011 revenue of $4.25B and EPS of $0.85, above consensus of $4.11B and $0.79, and that 44% of its revenue now come from online subscriptions. It also reports a "stronger than expected consumer response" to Call of Duty: MW3. Take that EA.

 

Activision has solid financials.  The average EPS growth of its last 3 quarters is 23%, while it delivered an earnings surprise that was 250% above analyst estimates for the past quarter. Its 3 Year EPS Growth Rate is a solid 17%, while its 3 Year Sales Growth Rate is 36%. It has a Debt/Equity Ratio of 0%, and its Annual Pre-Tax Margin is 31.3%.

 

Now with that said, MW3 could shape up to be a probable catalyst for Activision. It is one of Activision's hallmark products as well as one of its most profitable. With a potential catalyst and sound financials, Activision is looking like a good bet.  

5 Comments – Post Your Own

#1) On November 08, 2011 at 11:55 PM, memoandstitch (< 20) wrote:

I like Blizzard but not Activision. Activision relies too much on CoD (and on Blizzard for the earnings).  Everything gets old, including CoD.

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#2) On November 09, 2011 at 1:10 AM, walt373 (99.80) wrote:

WOW subscriptions are falling and that's a cause for concern. Knowing Blizzard, their next MMO will probably be amazing. But seeing how half of ATVI's earnings come from WOW, this is something investors need to watch closely.

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#3) On November 09, 2011 at 9:25 AM, edwjm (99.87) wrote:

@ #1:

Your opinion agrees with some comments I made in my pitch for ATVI.

I am curious as to your opinion of the company as a whole.  Do you think (as I do) that the company as a whole is a good investment because the advantages of the Blizzard side outweigh the disadvantages of the Activision side?

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#4) On November 09, 2011 at 6:31 PM, memoandstitch (< 20) wrote:

edwjm,

I don't think one can make an investment decision on ATVI based solely on the financial statements.  ATVI will continue to thrive as long as it continues to deliver hit games (like hit movies).  There is no guarantee (besides reputation) that this will be the case 10 years from now.  My investments in ATVI would be opportunistic, rather than hold-and-forget. Every time I buy or sell a game company (not just ATVI), I look at upcoming games and existing franchises to gauge its potential.  This is something unique to the game industry.

The bottom line is ATVI is a good company but you can't make money by just buying good companies.  You make money when the company exceeds market expectation.  CoD is already priced into the stock; it all rests on future games such as Diablo III, HoTS and  WoW.

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#5) On November 10, 2011 at 10:15 AM, edwjm (99.87) wrote:

I think Diablo III wil be a winer, and the current view on WoW is way to pessimistic.

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