Activision Blizzard, Inc. (NASDAQ:ATVI)

CAPS Rating: 4 out of 5

Activision Blizzard is a leading publisher of videogames, notably World of Warcraft, Call of Duty, Guitar Hero, and Tony Hawk.

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Player Avatar foolpri2341 (< 20) Submitted: 11/9/2011 7:30:48 PM : Underperform Start Price: $12.67 ATVI Score: -6.46

Activision-Blizzard is a company with large amounts of profit coming in each month, however with the Q3 earning being released 11/9/11, it showed that 44% of their earning came from the PC computer game "World of Warcraft". From a personal player of "World of Warcraft" I have a person person view on Activision-Blizzard biggest money maker. Although for the past year World of Warcraft has become pretty bad, Blizzard (who is mostly in charge of this game) has completely given up on this game. Not I but there are rant threads all over the internet that say how Blizzard is ruining World of Warcraft. Although Activision-Blizzard's Q3 report did show a large amount of profit, their stock still went down 6.5%. Partly from the debt crisis in Europe, but mostly from the 10% in subscribers from World of Warcraft, and this number will certainly continue to drop more rapidly with the lack of content, poor aspects of the game, and the complete abandonment of the game by Activisison-Blizzard. Even though Activision Blizzard has their console hit Call of Duty, that game only makes roughly 1 billion dollars in a month, a year, while World of Warcraft profits roughly 150 million dollars a month just from subscribers, that not including people actually buying in-game items, or the actual game itself which costs up to 60$ with all the game packs. Their main source of revenue is World of Warcraft, yet they continue to ignore its problems, resulting in a loss in profit. In my opinion their stock will continue to fall for the following years unless Blizzard themselves can either fix World of Warcraft or release a PC game similar to World of Warcraft.

Member Avatar donzorco (94.01) Submitted: 2/11/2012 11:20:34 AM
Recs: 2

I used to play WoW, back in the heyday before the expansions. I played the first expansion as well. From day one there were "rant threads all over the internet saying how Blizzard is ruining World of Warcraft."

This time you might be right. I no longer play, and really couldn't say how the game is doing. But I have some familiarity with Blizzard and the game and how they do things. I think they'll patch the game or the expansion will come out, reigniting players' interests in it. And you know what? There will be a round of new rants all over the interwebs with players railing against the changes. So long as they keep paying their subscription fees, it's fine by me. The loss in subs has slowed, they are expanding the game to other countries, and a new expansion is coming out.

But, as my bullish colleague Duke would say over at Stock Advisor, Warcraft ain't the only horse in the stable. Call of Duty sold like crazy, yes, but better yet they now have 7 (seven) million people signed up for their recurring service, Call of Duty Elite. More recurring, high margin digital revenue.

Diablo 3 should come out in the second or third quarter, complete with its real money auction house. This will be a massive game changer (feel free to disagree). I have more experience with the Diablo franchise; I still fire up D1 and D2 to this day every now and again. Couple Blizzard's proven formula for this dungeon crawler with the microtransactions the game will generate and I think you have a pretty potent revenue stream. Again, all digital, high margin stuff.

But that's not all! How about the big purple dragon in the room? Spyro and his buddies are also selling extremely well. ATVI (with some great innovation) figured out a way to blend video games and toys in a way that is actually good. Kids love it. You can say "oh well it's just a fad, like Pokemon." Maybe. But the pokemon games are still some of the biggest sellers of all time on the gameboy consoles, it generated several movies, card games, tv shows, etc. I'm not saying it's the same. I just don't want people to think it's a flash in the pan, one time thing. They recently announced the next game in the series, Skylander's Giants. With it will come a new host of toys.

Do you see a pattern here? They are leveraging their products to make more money out of each sale. Like the game? Buy the toys. Buy the subscription. Use the auction house. Why should it stop there?

Let's stop talking about perception and hope (wish in one hand, **** in the other, see which fills up first). The company has 3+ BILLION in cash. Zero debt. They are making piles of cash. They just raised the dividend 9%. They authorized another 1 billion in share buybacks.

The only thing, as of now, that you have to do with ATVI is be patient. Until there is a material change, I'm not sure what there is not to like for long term investors.

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