Cramer's 'Mad Money' Recap: He's Got Games

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"Bad news can sometimes be good news," Jim Cramer told viewers of his "Mad Money" TV show Thursday, and he wants people to buy Activision (ATVI Quote).

Activision announced earnings Wednesday and the company's outlook for the next six months is lousy, said Cramer. But, video game stocks are cyclical, so you need to buy at the bottom of the cycle, which is now, he said.

Take-Two Can't Play

Microsoft (MSFT Quote) will release its new Xbox at the end of the month, and Sony(SNE Quote) and Nintendo won't be far behind with their console offerings.

The lousy sales at Activision now are a sign that people are waiting and saving to buy new games for the new systems, said Cramer.

Cramer believes that the next video-game cycle will last three to four years, which is about how long it takes for the video-game companies to catch up with the new game consoles, he said. That means visibility.

Cramer prefers Activision to industry leader Electronic Arts (ERTS Quote) because he sees consolidation coming for the video-game industry.

Activision is smaller than Electronic Arts and is more likely to be a takeover target, he said. It also has two highly anticipated games Call of Duty II and Quake IV. Finally, Cramer likes the fact that retailer GameStop (GME Quote) is offering Activision games with all but one of its Xbox 360 packages.

Activision is not for everybody, though. The stock is volatile. It's the "ultimate schnitzel stock," said Cramer. So, buy a little now, and buy more on a pullback.

In response to a question about Take-Two Interactive Software (TTWO Quote), Cramer said the company had "disappointed for multiple quarters" and is "in the pantheon of bad." Stay away, he said.

Cramer is also not a fan of Midway Games (MWY Quote).

Commenting on GameStop, Cramer said he loves the stock but will probably sell a little when the Xbox 360 launches at the end of November.