Activision (NASDAQ: ATVI) is
a leading developer, publisher and distributor of interactive entertainment and leisure products. Offerings include such action titles as Tony Hawk's Underground, Doom, and Call of Duty. The firm also makes games based on licensed properties associated with the films Star Wars, Spider-Man, X-Men and Shrek. Activision games operate on Sony (NYSE: SNE), Nintendo and Microsoft (NASDAQ: MSFT) console and portable devices, as well as on personal computers. The company agreed to sell a 52% stake to Vivendi late last year, in a deal valued at $9.8 billion. Activision will be combined with Vivendi Games, to create the world's largest independent video games company.
The firm surprised the Street earlier in the month, when it reported fiscal Q4 EPS of 17 cents and revenues of $602.5 million. Analysts had been expecting five cents and $369.1 million. Management also guided FY09 EPS to $1.30 ($1.18 consensus) and FY09 revenues to $3.1 billion ($2.82B consensus). Moving toward the Vivendi link-up, the CEO promised to "focus our resources on proven properties with broad global appeal." Six brokerages subsequently declared the stock a "buy".
ATVI shares
popped on the news and then moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers now recommend the issue with eight "strong buys", fourteen "buys" and two "holds". The ATVI Sales Growth rate (92.78%), EPS Growth rate (-0.05 to +0.17) and Return on Assets (15.95%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 90% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $16.94 and $33.67. A stop-loss of $28.50 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.