Will you heed the call?: Activision Blizzard, Inc. (ATVI) and More

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is also releasing its new BioShock game this March. This spring is going to be hard for Activision, as it has to compete with Crisis 3, the new Gears of War game (exclusively for the Xbox, which is COD’s number one selling platform), and the new BioShock. The next Call of Duty will have very little competition, however. With no Battlefield, Gears of War, or Halo being released, the only thing Call of Duty has to worry about is GTA 5. But, GTA 5 caters to a different type of gamer than COD; one who prefers solo play rather than competitive online play. Combined with the fact that the next COD is supposed to be running on the next-gen consoles, it looks like Activision’s Fall is going to be very strong this year. Another plus for Activision is that the 2nd biggest console out right now (the Xbox 360 at 74.3 million units compared to PS3’s 73 million units) is also Activision’s number 1 selling platform for COD. Wii beats out the Xbox with 99 million units, and now that it is offering Call of Duty with little competition I would expect sales to marginally increase for Activision.

Final Thoughts on Fundamentals

Activision has seen a sharp run up in its stock price and now trades at a PE (TTM) of 14.5 and at 1.5 times book value. Some may look at that run and say the stock is overvalued, but you have to look at Activision’s track record to see that its’ not. Activision has grown its EPS by 40% over the past 5 years and its revenues by 28% in that same time period. Back in Q4 2010 Activision Blizzard had a an EPS of 53 cents a share, and 62 cents in Q4 2011. As of the last quarter (Q4 2012) that was up to 78 cents a share. Activision is expected to keep growing its EPS by over 20% annually, and if it does a PE of 14.5 looks pretty cheap. Activision has no debts, pays out a 1.3% dividend (with a payout ratio of 17.82%), and has $4.375 billion in cash. That makes Activision’s stock price about 27% cash. Combine that with an EPS growing at 20% and future catalysts ahead, like the release of Titan, its new MMORPG, or the update for StarCraft 2, and Activision still looks like a good buy. While ideally I would wait for a pullback in the stock before you buy in, in the long run Activision looks it is going to continue to outperform. I’m still bullish on Activision.

The article Will you heed the call? originally appeared on Fool.com and is written by Callum Turcan.

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