Activision Blizzard, Inc. (NASDAQ:ATVI)

It seems to me many investors and so called "experts" from wall street do not understand this stock or video games in general. Yes there are pros and cons to this stock and I will try to cover them over the next few paragraphs.

Pros
In the past after you bought a game and beat it, you put it away and played it everyone once in while or maybe when friends came over (Ex.Guitar Hero). However, many recent games have allowed you to play against other gamers online to keep you interested in their product. They also offer extra content and maps downloads for a certain price (warcraft and cod). Why do you think Black ops sold 5 million copies in the first week for 60 dollars a pop. On X-box (not counting Playstation ) there are about 700,000-800,000 worldwide players playing this one game every night. Even at 4 in the morning there are still 200,000-300,000 players online. Currently Activision has a majority of its sales and online gaming from America, Canada,Europe and parts of South America. There is still a big potential market in China, Russia, India, Africa and South America where there is not much market penetration.The infrastructure for online gaming in these countries are still in the early stages and will only improve as technology does.

The reason online gaming is important Activision we need to compare it to a Movie studio and their revenue stream. When a major studio releases a movie it first goes to theaters for customers to watch it (revenue stream 1). Next it is released to pay per view or on-demand for those who missed it at the theater or want to watch it again (revenue stream 2). They make money when netflix, redbox and other online rental places buy inventory to rent that movie out (Revenue stream 3) Another form of revenue is when customers buy the movie once it is on blue ray or dvd (revenue stream 4) Finally when a television station or cable channel plays that movie they are playing royalties to the movie studio to show that movie(revenue stream 5).

When Activison releases a game the first initial buyers of a game pay anywhere from 50-60 dollars to own it. Once the game is six months old the price will fall to maybe 30 dollars but lets not forget that is what the companies like frys, walmart, best buy and fry charge. Activision is probably receiving half the retail price the retail stores are charging (revenue stream 1) The next "potential" revenue will only occur if the game is online capable or there is interest to play it on line. (revenue stream 2) I also say "potential" is because X-box charges players a monthly or yearly fee to play online. While Playstation allows players to play online for free. Currently I am unaware of how Microsoft and Activision split online gaming fees.

Cons
Every year companies like Activision lose market share to simple attrition. I am not talking about losses to other companies but just a change in lifestyle. Gamers get older and with new jobs and family the focus is shifted away. Only in your teens and twenties can you spend countless hours and money on video games. Activision needs to make sure there is always a new customers to replace the ones they lose. Another potential negative many people over look is the sub-culture of cheaters in online games. They are commonly referred to as Modders ( the illegal modifications they make to their game consoles) because they allow cheaters to rank up faster or have a unfair advantage when playing online by manipulating programs. Many players eventually will grow tired of this and will stop playing the games that allow this. Activision has programmers that continuously work on these cheats so they can issue updates to patch these programs. However, this is not beneficial to activision since they are wasting money and human capital to fix these flaws. There could be a better ROI if these programmers were working on new titles instead.

Yes this stock is not a big mover day to day. If you are looking for a better investment in the next year or so there are other opportunities. But this stock has a will show gains in the next 3-5 years

It got knocked down a bit from the death of Guitar Hero, but this company has thoroughbreds in its stable. I don't see the popularity of World of Warcraft and Call of Duty subsiding any time soon.

Activision Blizzard, Inc. (NASDAQ:ATVI) is a leading publisher of videogames.
At the current price of about $11, the P/E is almost 40.
The price action over the last year has been choppy with a high of 12.65 and a low of 9.99.

The present company is the result of a fabulous company (Blizzard) being acquired by a mediocre company (Activision) with a CEO greatly disliked by a large portion of the client base. For more on this situation, GOOGLE "Bobby Kotick."

The good news is that Blizzard has three hit franchises, Diablo, Starcraft, and Warcraft.
World of Warcraft alone accounts for 54% of the revenue of the entire company.
I myself am not a gamer, but I know some people that are strongly addicted.
Their devotion to the franchise is phenominal. Blizzard is a 20 year old company.
They even have their own convention which attracts a very large crowd and is on Directv.

The bad news is the Activision side and it unpopular (with the clients) CEO.
The plug is being pulled on Guitar Hero. DJ Hero has already crashed and burned.
It has two other franchises, Call of Duty and Tony Hawk. They also have several other games.
Call of Duty is a leading first person shooter game. It is Activision's cash cow.
Tony Hawk only appeals to Skatebording fans.

Were these Still two separate companies, I would green thumb Blizzard and red thumb Activision.
But they are not. I am green thumbing ATVI because of Blizzard.

Monopoly over all of teens most popular video games and multiple genres.

Because they have the cash flow to keep innovating. They like creating the next best thing and they've got the best people to do it with. Why do we doubt that they cannot outdo their other massive hits.

While I'm a WoW devoutee, I think Blizzard has seen it's run for a bit. When CoD goes on-line or they find another cash cow that they can translate to subscription sales, I'll buy in. But for now, I don't see much growth...Still love them for long term stability, but not a big believer in the growth story "right now".

ATVI was great several years ago. Guitar Hero, Call of Duety, and World of Warcraft were their winners. The games won title after title and then they lost it. Guitar Hero has been beaten out by Harmonix, Call of Duety is replaced by Bad Company, and World of Warcraft is losing marketshare quickly to games such as DC Universe Online. ATVI had its day but the fat lady is singing and the piper is piping.

Iti's a core stock. Coming out with new TV programs that will enchane their video games sales.

This is the type of company I generally don't like. The company has to consistently produce new products just to maintain revenues and create more and more new products each year to grow. This "blockbuster" business model has led to a large portion of revenues coming from a small number of products. The Blizzard acquisition has changed this model and added a measure of reliability to earnings with WoW users paying reliable revenues month after month. The sale of new maps and expansions within the Call of Duty franchise also helps add more predictability to the company's revenue stream. The pursuit of new MMORPG games provides a good foundation for growth with games created for 3rd parties and blockbusters adding meaningfully, yet unpredictably year after year.

The video game industry as a whole should experience considerable growth over the next few decades as the new generations of gamers add to the ranks of the first generation, who still uses games as an inexpensive, interactive source of entertainment. Emerging markets are just going through their first generation of video gamers and should present considerable longterm growth. MMORPGs exhibit classic network effects, as games with a larger established base of users provide more entertainment with regular updates helping to keep these games relevant to users (while adding to revenues). The industry also benefits from scale advantages, as the costs for developing a game are fixed, so spreading these costs over a larger revenue base earns greater profits.

Although results have been clouded by their recent reverse acquisition of Blizzard, the company has consistantly earned a high ROE. Combined with their growth prospects the company seems to be at a fair valuation with a P/E, backing out cash, of less than 15. This is the type of investment that requires more regular monitoring, but this additional work should be worth it from higher returns. I purchased in the money calls today and plan on holding this investment for some time.

It's a better stock than the market thinks right now

Buying the dip.

Seems like a great time to start a position - down 10% on short-term worries.

They took a 10% beat the day of this pick when they junked the Guitar Hero franchise. I think they probably have a bit further to fall, but they are not dead yet. If they go under $9 I may look into picking some up with real money.

They are stuck at the narrow range of their current trading depth relying to much on one release; Call of Duty. Other revenue coming in from W.O.W which has run its course and will lose subscribers and nothing new on the horizon.

Stock has climbed up to hover near 50 day m/a. After earnings this evening I'm looking for a gap up above this m/a.

Im 59 yrs old. In order to spend time with my sons (then 16 & 14) in 2006 they introduced me to a game called World of Warcraft. Five years later, they are in college and we are still playing. While there are other games that hold their attention for a while, ultimately they (and friends) make their way back to WoW. And for good reason; it's easy to learn, but so hard to master. It constantly changes and provides new challenges.
Is this a good reason to buy the stock? IDK. But it sure seems to me that there is a long road that this stock can run on....

The hardcore gamer segment of the market will recover over the next few years. The financial cost, global reach and business sophistication required to lead this sector is available to ATVI, so their leadership grows. Gamer communities will become increasingly attractive commercial opportunities; again ATVI should prosper. They must pay close attention to Asian competition.

Diverse range of engineers creating games.

Growth potential and great games.