Can You Buy Activision Blizzard After Q1 Report?

Posted May 7th 2010 3:00PM by Steven Mallas
Filed under: Earnings Reports, Electronic Arts (ERTS), Activision Inc (ATVI), THQ Inc. (THQI)

I'll be honest: the thought of buying Activision Blizzard (ATVI) makes me nervous. First, buying just about any stock right now involves a leap of faith: I mean, how do you know the selling hasn't just begun? Investors are scared, my friends, because of macro issues. However, the second reason I'm hesitant about the software publisher is simply because of the video-game industry itself; the latest console cycle is aging, and the industry is waiting for further catalysts to emerge to make the sector an unambiguous buy once again.

Yet, this company is probably the best out there in terms of what it does. Its pipeline is solid, although not as good as it was. Remember Guitar Hero? What, you've already started to forget? And what about DJ Hero? Did that come and go in the blink of an eye?

Of course, there's the Blizzard side to the story: World of Warcraft and StarCraft are extremely popular, valuable brands. And there's something else, too: the stock is, as of this writing, in the green. It might not be in the green by much (up 19 cents to $10.68), but it is in the green nevertheless. And on the heels of an earnings report, no less.

For the first quarter, the company made an adjusted 9 cents per share. That was five pennies better than what the analysts were calling for. Certainly a good performance, but should investors rush in and buy?

With all the market volatility going on, I think you could make a good case that now is the time to start buying equities. The problem is, you also could make a good case, a technical one mostly, that we have more downside to go. And you have to be as selective as you can when looking for quality names that have been knocked down.

I would love to see Activision Blizzard, whose colleagues include Electronic Arts (ERTS) and THQ (THQI), pushed down to either close to, or below, $10 per share. If that were to happen now that the earnings report is over, and without any negative news specific to the business itself, it would really make me take notice. It's difficult to call the current price unattractive, but I'd rather have a bit more margin of safety.

Disclosure: I don't own any company mentioned; positions can change without notice.

Tags: activision blizzard, ATVI, electronic arts, ERTS, featured, inthenews, THQ, THQI, video games