Hi Amir,
I tried to pick up shares at 9 3/8 this morning when I noticed
the shares got whacked, but I was too slow I guess. Nothing
dramatic, but just to scale in further my position in this
company. While I like the prospects of Activision, I think
anyone purchasing this stock should be doing so with a long
range plan, as there is very little liquidity in small cap
stocks, if not stock markets worldwide at present. So you
can get in cheaply, but if you are short term trading a stock,
the question is can you get out?
What is your opinion regarding the ability of Activision to
improve their net margins in the coming quarters? I don't think
anyone questions their ability to increase revenues over the
next several quarters, but sales and marketing costs last quarter
were (and have recently been) high in my opinion, and net profit
margin, if memory serves me right, was 2.6%. In the past years,
net margins were as high as 5%-6% (don't hold me to those figures
though as I am again using memory).
My investment thesis is that Activision should be able to grow
revenues at a 20-25% rate with the caveat that all bets are off
if we enter a full-blown worldwide recession next year. Then
based on higher revenues, fixed costs should fall relatively
as they are spread over a larger revenue base. Then hopefully,
the company can increase their operational efficiencies and also
get margins up that way as well. Better performance in this area
is the key to the stock doing well going forward in my opinion.
It is in this area I was hoping you might be able to offer perhaps
some insight as how the company might be able to acheive this.
Any response appreciated.
Peter.
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