Could Activision Blizzard Help You Level Up Your Investment Returns? (ATVI)

In anticipation of strong holiday sales, shares of video game publisher Activision Blizzard (ATVI) are trading at a three-year high.  Activision’s shares are trading higher on strong market sentiment, as the video game publisher is set to release its newest installment of its wildly popular “Call of Duty” franchise in November and is also home to many of the industry’s top titles.


“Call of Duty: Modern Warfare 3” is slated for a November release, and is anticipated to be one of the season’s best selling video games.  Last year’s November release of Activision’s largest franchise “Call of Duty: Black Ops” sold seven million copies within the first 24 hours of its release, and went on to generate $1 billion in sales for the Santa Monica, California, company within six months.

This season is expected to see a prominent line up of big-budget game titles including Electronic Arts’ “Battlefield 3”, Sony Computer Entertainment’s “Uncharted 3: Drake’s Deception”, and Warner Bros. Interactive Entertainment’s “Batman: Arkham City”.

While the video game industry as a whole found the first part of 2011 to be challenging to say the least-with video game sales falling 26% in July from the previous year, quickly followed by a 21% decline for August- Activision Blizzard, home to five of the ten best selling games of all time in North America, could be poised to profit from an increase in video game sales that is expected to continue into next year.

Activision Blizzard New Releases And Updates Expected To Propel Growth

Publishing personal computer (PC), hand-held, mobile and online games, Activision Blizzard is in a position to profit off of several upcoming events, including a foray into a new genre of video games which combine action figures and a gaming console.

The popular development team, Infinity Ward, will be releasing “Modern Warfare 3” on November 8, 2011, and Activision Blizzard has and update to the hit online game World of Warcraft coming for the holidays.  World of Warcraft enjoys a loyal following, and is expected to continue to pull in revenue for the game developer.

Sales of the much anticipated “Diablo III” are expected to be spectacular as well, as this title enjoys a large fan base and gamers who tried “Starcraft 2” will most likely jump on “Diablo III”.  Holiday sales of the recently released “Spider-Man: Edge of Time” video game, which boasts an all-star cast that includes Val Kilmer, as well as “Skylanders: Spyro’s Adventure” are expected to be strong as well.

Activision’s strengths can be seen in many areas, including revenue growth, a largely solid financial position with debt levels that are reasonable by most measures, compelling growth in net income, an impressive record of earnings-per-share growth, and solid stock performance.

What’s Ahead For Activision Blizzard

While retail video game sales remain an important metric for the industry, as games go digital, propelled by a broader adoption of mobile devices, it is becoming increasingly more irrelevant.  This may make it more challenging to gauge the video game industry looking forward.

Video game discs are the core of Activision Blizzard’s business, and the trend of gamers turning to free or less expensive games on mobile devices and social networks could prove to be an issue for the game developer.  While Activision’s exposure to social media and online games is not as significant as its main competitor, Electronic Arts, its product pipeline is considerably stronger, making it potentially the better play in video game developers.

Activision could enjoy a considerable boost from the one-two punch of strong holiday sales, as well as the 2012 release of “Diablo III”. Investors should watch for opportunities to buy into long positions on the dips in the coming months, and playing the market in accordance with the releases of the bigger titles, particularly “Diablo III”.

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