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Earlier in the week, I discussed the disappointing reaction concerning Electronic Arts (ERTS) and its most recent quarterly report. Just a couple days later, Activision Blizzard (ATVI) released its own three-month numbers, and the situation was completely different. The market liked the data, deciding to give the stock a bid.
There are three very positive elements to the fourth-quarter story that are obviously intriguing investors. First, on an adjusted basis, the publisher delivered 49 cents per share on the bottom line, which, according to Reuters, is six pennies ahead of projections. Second, shareholders have a $1 billion repurchase initiative to look forward to. Third, management believes it's time to directly distribute some of the cash-flow spoils to its true believers: A 15-cent annual dividend has been declared.
Shares of Activision Blizzard scored in yesterday's after-hours session -- rising over 5%. Given the apparent fundamentals, was I wrong to sell the stock last month? Well ...
I don't think so. I'm writing this ahead of Thursday's bell, so I'll say this: If the buying continues during the regular session, I would be more likely to suggest taking profits instead of either holding or adding to a position in this company.
As far as I'm concerned, the jury is still out when it comes to video games. More specific to the subject under discussion, will a new Guitar Hero or Tony Hawk game do much for the stock? There's been some bad publicity on both those titles in terms of waning popularity.
I've been criticized in the past for not giving enough credit to the Blizzard asset. Agreed: This is a significant part of the overall value proposition to the business. Very significant, in fact.
What I plan to do is monitor the price action in the weeks ahead to determine if Activision Blizzard should become a member of my portfolio once again. However, I can tell you that the dividend did come as a surprise to me; it does indicate confidence on the part of execs. Nevertheless, I'm not going to rush in and buy just because of the yield (there are more attractive yields out there), and, although it did cross my mind in brief fashion, I will not attempt any sort of dividend capture (although I'm sure many will be trying).
This was a good quarter for Activision Blizzard, especially considering the tough holiday season (then again, let's be real: the latest Call of Duty title was not going to be denied its right to dominate, bad economy or not). I'll stay on the sidelines for now, but I'll keep the publisher on a watch list.
Disclosure: I don't own any company mentioned; positions can change without notice.
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