Thought you might enjoy this Jake.
Barron's(11/23) A Return Visit To Earlier Stories: Videogame Theory: Activision Is Cheap
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Sat Nov 21 00:05:02 2009 EST
(From BARRON'S)
By Sandra Ward
Activision Blizzard's blockbuster videogame -- Call of Duty: Modern Warfare 2
-- is setting all kinds of sales records. The company bought back nearly $300
million of stock in the third quarter. Management has offered reassurances that
updates to two of its most popular games will be available in 2010 after
disappointing delays. And still, the shares remain inexpensive.
Even with its compelling outlook, the world's No. 1 videogame maker has seen
its shares dip since Barron's pointed out in late August what an attractive
investment they were ("Game-Changing Hero Is Poised to Rule," Aug. 31.) At the
time, the stock fetched 11.69, slightly above Friday's close of 11.38.
Activision trades for less than 15 times consensus 2010 earnings estimates of
77 cents a share. Exclude the $2.10 a share in cash on the balance sheet, and
the multiple drops to 12. Bulls see the stock reaching 15 to 16 within the next
year, or almost 40% above current levels.
Concerns about the strength of consumer spending in the teeth of a recession
have weighed on Activision as sales of videogame equipment and software slump.
That's despite steep price cuts on consoles by industry leaders Nintendo, Sony
and Microsoft. Stock sales by Activision's chief executive, Bobby Kotick, also
have pressured the shares.
Exceeding the most optimistic expectations, Call of Duty: Modern Warfare 2
reaped $310 million in sales in its first day available in the U.S. and the
U.K. In its first five days worldwide, it brought in $550 million, beating the
previous record set last year, when Take-Two Interactive's (TTWO) Grand Theft
Auto IV took in $500 million in its first five-day period. More noteworthy,
perhaps, given Kotick's assertion videogames will one day eclipse the film and
television industries, Call of Duty sales are well above records set at the box
office for some of the most popular movies ever: Harry Potter and the
Half-Blood Prince and the Dark Knight.
Wall Street, it's time to play.
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