NEW YORK (TheStreet) -- Activision Blizzard( RIMM) 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.
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.
The Wall Street analysts like the stock and issued 11 strong buy, nine buy and five hold recommendations for their clients. If their numbers are correct they look for investors to receive an annual total return in the 24%-28% range while
rating system ranks this only a B stock. The individual investor as represented by 7,198 readers of
gave the stock a 97% vote to beat the market. That sentiment is also reflected by the short interests which has declined from a high of 29 million shares in March to around 15 million shares recently.
While Activision Blizzard was up 4% over the past 12 months,
Research In Motion
( RIMM) Sirius XM Radio (SIRI) was up 50%,
Research In Motion
( RIMM) Electronic Arts (EA) was down 34% and
Research In Motion
( RIMM) Dolby Labs (DLB) was up 5%.
SIRI is ranked A by
and analysts project revenue will be up 12.90% this year and another 11.60% next year. Earnings are estimated to be up 685.7% this year and down 81.8% next year but average out over the next five years by an annual rate of 25.2%.
EA is ranked C by
and revenue projections are down 0.60% this year and up 6.6% next year. Earnings are expected to be up 24.7% this year, 17.9% next year and average 18.04% annually for the next five years
DLB gets a C rating from
with revenue projected to decrease 4.60% this year and be flat the next year. Earnings estimated to be down 12.4% next year, down an additional 1.7% next year but increase and average around 14.25% annual growth over the next five years.
Activision Blizzard is not a stock for me in spite of the interest by Wall Street analysts and the individual investor. I look for stocks with nice, steady increases in revenue and earnings in the 10% range and I don't see that here.
Although the balance sheet is solid with lots of cash and no debt income investors will not be interested in a 1.50% dividend. If you are younger and follow the online gaming industry you might like the analysts projections of total annual returns in the 24%-28% range.
It would appear from the moving averages and turtle channels that the stock will need close monitoring to plot an entry point, and that this may be a good time for long-term speculators to place a bet.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.