I'm still bullish on Activision Blizzard (NASDAQ: ATVI), which competes with Electronic Arts (NASDAQ: ERTS) and Take-Two Interactive (NASDAQ: TTWO), among others. For now. I qualify my stance because, I have to admit, my confidence has been shaken. Although I recently wrote a positive piece about the publisher's prospects, there's some word that the company's two major franchises may not have sold as well as expected during the holidays.
Two analysts have cut their price targets on the company's stock, and the stock has hit technical trouble. Indeed, if you own shares of Activision Blizzard, you've noticed the recent deterioration in the stock's momentum. The problem is that sales of Guitar Hero and Call of Duty may have been affected by the bad economy. Although they undoubtedly sold very well, they may not have rocked enough to justify the company's multiple. Now, the business is certainly a great longer-term play (at least until the current video-game cycle starts to wane), and the World of Warcraft online asset should be an incredible growth driver going forward, but on the short term, I have to say that traders need to be cautious. I see a bit more downside to the stock before it possibly recovers, which, at this time, I think it will.
Here's what I'm thinking of doing in terms of my specific situation. I have shares of ATVI in a taxable account, still in the green. I may sell those after January 1 to protect the profits. Then, with the cash I have in another account (a Roth, thankfully), I will buy the shares again. Even though I can't say I'm as bullish on the company as I have been in the past, I have a feeling that, at these prices, the stock is attractive and has significant potential to rise in the coming year. You'll need patience, though, let me say that right upfront. I think the overall market action will be rough once January hits and we get all the retail sales numbers. Still, I think the publisher's portfolio is full of valuable properties, and I believe that, out of all the video-game software suppliers, it remains the best of breed.
Disclosure: I own Activision Blizzard; positions can change without notice.
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