With shares of Activision Blizzard (NASDAQ:ATVI) trading at around $10.85, is ATVI an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Activision Blizzard has been the center of a lot of attention recently due to the tragedy in Newton, Connecticut. The company has been receiving a lot of heat because of the violent nature of its Call of Duty series. Those in the industry will point out that numerous studies have proven that there is no connection between entertainment and real-life violence. However, it should be noted that the shooter (name will not be mentioned) played Call of Duty for hours on end in his mother’s basement.
If the Call of Duty series is in trouble, then Activision Blizzard better think of another approach fast. This is a company with a stellar balance sheet. Therefore, there is plenty of time available for brainstorming, which can then lead to new strategies. However, investors want to see results as soon as possible.
Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.
In regards to Call of Duty: Black Ops II, there is good news and bad news. The good news is that the game generated $1 billion in sales in just 15 days. While that’s incredible, if you look at the 759 reviews on Amazon.com (NASDAQ:AMZN), you will see some less-than-encouraging feedback. The game has a three-star rating out of five stars, and 303 consumers were less than satisfied with their gaming experience. The impressive initial sales likely relates to the past success in the series. Going forward, the excitement for the game will fade, which could bring trouble for this once-loved gaming company.
On the positive side, Activision Blizzard has a profit margin of 19.89 percent and over $1.20 billion in operating cash flow. Analysts have also been heavily weighted toward the Buy side, but that will likely change in the near future.
Let’s take a look at some other important numbers.