Stock of the Day - January 15, 2009

Activision Blizzard, Inc. (ATVI)

Activision Blizzard (ATVI) is one my favorite stocks for 2009! The company, which publishes online and console games, has a great product portfolio under its name.  It boasts popular titles such as Guitar Hero, Call of Duty, Tony Hawk, StarCraft, Diablo, Warcraft, and World of Warcraft.  I am not a big gamer, but even I know that these game titles are some of the best and most popular names in the video game market. 

There are many factors that I believe will help Activision’s stock price to steadily rise, so I will list them and go into detail in order to show you why I love this stock so much.

1)    The video game industry is as strong as ever, and it continues to grow.  According to the most recent statistics, sales of game software in the U.S. jumped 15% in December 2008, easily beating analyst expectations of 9-10%.  GameStop, one of the largest video game retailers, said that its same-store sales during the 2008 holiday season also rose 10%.  This is an unbelievably promising number when considering how weak the economy has been and how poor retailers in other industries fared during the 2008 holiday season.  These numbers show me that the video game industry is recession-proof, and that people are addicted to their video games!  Recently, Activision CEO Mike Griffith proclaimed, “video games are poised to eclipse all other forms of entertainment in the decade ahead.”  According to Griffith, between 2003 and 2007, movie ticket sales and hours of television watched fell by 6%, and music sales slumped 12%.  Over that same period, the video game business has grown by 40 percent!

2)    Activision sells some of the best products in the video game industry, and it is planning on coming out with new games in the near future that will also be extremely popular.  Activision’s three most popular games today are Call of Duty (33 million copies sold), Guitar Hero (25 million copies sold), and World of Warcraft (11 million subscribers).  “Call of Duty: World at War” was the second best-selling game for the month of December, behind “Wii Play”, as it sold 1.33 million units on Xbox 360 and 533,000 units for PS3.  I fully expect all three of these games to continue being extremely popular and addicting for a long time, and I would buy Activision stock strictly based on the success of these three games.  But, the product lineup for 2009 is what makes me so optimistic about this company’s potential.  At some point this year, Activision is planning on releasing the second World of Warcraft Expansion Pack.  With 11 million current subscribers and addicted gamers waiting for an upgrade, it is safe to say that a high percentage of these current subscribers will buy the expansion pack.  StarCraft 2 is also set to be released in 2009.  I cannot say much about StarCraft from personal experience, but the original StarCraft was the best selling real-time strategy game of all time. From talks that I have had with my gamer friends and from doing some additional research, it sure sounds like this sequel also has the potential to be one of the most popular games ever! Throw in the fact that Activision is also planning to release a new Star Fox game and Diablo 3 in 2009, and it is clear to see why I believe this company has so much growth potential. 

3)    As for Activision’s stock price, it is currently trading at $9.35, and it is over 50% lower than its 52-week high of $19.28.  I do not believe that this drop in price is justified, and I think that the stock price was pulled down due to the poor individual performances of its two biggest competitors, Take Two Interactive (TTWO) and Electronic Arts (ERTS).  Many investors took the problems with TTWO and ERTS as an indication of larger problems within the video game industry, but it seems clear to me that the video game industry is fine and that the internal problems with Activision’s competitors should be seen as an opportunity for Activision to take over more market share in its industry.  Activision is the perfect example of a stock that has unjustly been beaten down by Wall Street, and when investors eventually realize this, its stock price will reach higher and more reasonable levels. 

Think about how many friends you have who are hooked on Call of Duty, World of Warcraft, or Guitar Hero. According to one statistic, the average World of Warcraft player spends 11 hours a week playing the unbelievably addicting game.  I have heard nothing but good things about Activision games from my friends and from video game critics.  If you love playing Activision’s games, why not make some money while playing them by buying some of the company’s shares? 

I just recently bought some Activision shares, and I highly suggest that you do the same.  Activision is one of my favorite stocks for 2009, and I am extremely enthusiastic about this company! It is not often that I promote a stock this much, but this is one of those rare gems that I cannot get enough of.

Let’s make some money together,

 

Niki Pezeshki

College Trillionaire