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TheStreet Open House

Play Activision Blizzard Only if You're a Gamer: Opinion

Stocks in this article: ATVI EA DLB SIRI

NEW YORK ( TheStreet) -- Activision Blizzard (ATVI - Get Report) is a stock that you either love or hate.

My first advice comes from Warren Buffet: "Only invest in companies you understand." If you recognize and understand "World of War," "Call of Duty," "Guitar Hero" or "Tony Hawk," then the stock may be for you. If you don't know who Tony Hawk is, maybe it's not the stock for you.

Activision Blizzard publishes online, personal computer, console, handheld, and mobile interactive entertainment worldwide. The company markets its products to direct mass-market retailers, consumer electronics stores, discount warehouses, and game specialty stores through direct-to-retail basis, third-party distribution, and licensing arrangements, as well as digital online delivery methods. Activision Blizzard, Inc. is headquartered in Santa Monica, Cali. and is a subsidiary of Vivendi S.A. (Yahoo Finance profile)

During the past six months the stock tracked the ups and down of the market as evidenced by this graph provided by Barchart. While the stock was done 6% the Value Line Index was down around 3%:

Factors to Consider

Technical indicators provided by Barchart:

The stock has been trading downward. Although it was up 1.29% last month, it is presently 18.4% off its one-year high. The decreasing momentum gives the stock a 24% Barchart technical sell signal as well as a Trend Spotter sell signal.

It is trading above its 20-day moving average but still below its 50- and 100-day moving averages, resulting in a 48.77% Relative Strength Index. I like an RSI above 50%. The stock traded recently at $11.75 which is below its 50-day moving average of $11.82.

Fundamental Factors

The stock is followed by Wall Street where 18 brokerage firms assigned 25 analysts to make projections. The analysts think revenue will be up 4.2% this year and another 1.3% next year. Earnings estimates are for an increase of 8.6% this year, 7.9% next year and a five-year annual rate of increase of 9.9%.

The stock has a B++ balance sheet with lots of cash and no debt. Hard to find that in the interactive entertainment industry. The P/E ratio of 13.77 is below the markets P/E of 14.60 and the dividend rate of 1.5% which is about 25% of earnings is lower that the market dividend rate of 2.30%. The interactive entertainment industry is very hip and technology based and if the game offerings are not continually updated gamers go to elsewhere.

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