Activision Blizzard Delivering to Wall Street
The gaming sector is sizzling and making investors in top gaming companies like Activision Blizzard, Inc. (NASDAQ:ATVI) giddy.
ATVI stock surged 17% midday on Friday, to a new record high, after delivering an impressive fourth quarter. In the process, the Activision Blizzard stock price broke above key chart resistance at $41.00—$45.00 on a bullish opening gap.
The stock has been on a nice uptrend, with multiple breakouts in 2013, 2015, and on Friday. The uptrend has been accompanied by a rising moving average convergence/divergence (MACD) and relative strength.
Chart courtesy of StockCharts.com
Just recently, I discussed the merits of Take Two Interactive Software Inc. (NASDAQ:TTWO) stock, which also established a new 52-week high.
And just like TTWO, I have covered Activision Blizzard stock for years since the stock was trading in the mid-teens.
The commonality between the companies is that both have at least one massive franchise game in its portfolio, along with multiple secondary games.
My Bull Case for ATVI Stock
Activision Blizzard is widely known for its massively played Call of Duty warfare game that was first launched in October 2003 and has sold in excess of 250 million copies, encompassing numerous editions throughout the years.
While the Call of Duty franchise is the company’s cornerstone game, Activision Blizzard also markets popular games such as World of Warcraft and Destiny.
But what is also exciting was the company’s strategic decision to acquire mobile games maker King Digital Entertainment PLC (NYSE:KING) for $5.9 billion in February 2016. The company is best known for its Candy Crush mobile game that took the mobile gaming world by storm. The company pipeline comprises of more than 200 games.
The move to add King Digital was imperative, as the gaming world is moving rapidly toward mobile platforms, so it made a whole lot of sense for Activision Blizzard, which did not have a major mobile presence.
The two-pronged attack with fixed and mobile gaming platforms should bode well for ATVI stock, especially if the company can turn up another big franchise game.
There may be some hesitancy, given the price appreciation in Activision Blizzard stock up 28% year-to-date and 54% over the past year, so I don’t blame you for being a bit squeamish.
Activision Blizzard clearly believes in itself and is buying back up to $1.0 billion of its common stock and is raising its dividends, which ultimately is a good use of capital.
If you are worried about the price of ATVI stock, you could wait for weakness or enter with long call options or selling put options to set a lower entry point.