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Activision Blizzard is One Dip You Don't Want to Buy

Real Money's Stephen 'Sarge' Guilfoyle says this stock is broken, at least for now.

The stock of Activision Blizzard  (ATVI) - Get Activision Blizzard, Inc. Report  should be avoided right now, Real Money’s Stephen Sarge Guilfoyle argues.

“Buy the dip? The stock is broken, at least for now,” Guilfoyle wrote recently on Real Money.   “Dip buyers may want to give this one the ‘three day rule’... and others may want to wait to see if the firm really can get their act together.”

The video game company has had a string of bad news lately. In July, the California Department of Fair Employment and Housing filed a civil action suit claiming the company had created and allowed a pervasive “frat boy” workplace culture. Activision Blizzard was subpoenaed by the Securities and Exchange Commission about workplace issues.

In November, the company said 20 employees were fired and another 20 were disciplined after its settlement with the Equal Employment Opportunity Commission. The company’s president was replaced in August by Jen Oneal and Mike Ybarra who serve as co-leaders. However, the company has already announced that Oneal will step down.

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Activision Blizzard’s third-quarter earnings results were mixed. The company reported adjusted EPS of $0.72 and GAAP EPS of $0.82, which both beat Wall Street estimates. However, the number of monthly active users fell to 390 million from 408 million the previous quarter.

The company has the potential to work on improving its balance sheet since its current assets are larger than current liabilities, but waiting to invest in the stock is a good strategy, Guilfoyle wrote.

“Have no doubt, Activision Blizzard will be back, and will probably be a better company and healthier stock when they do,” he wrote. “I just don't know if I am ready to go there just yet. The balance sheet alone will sustain the firm through whatever it still has to go through.”

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