Gang, I have owned this company since 2002 and 2003. I am not a gamer, so I have some objectivity. Here's what I have learned:
1. Lots of devoted gamers buy this stock, thinking that great games=a great company=a great stock. They are wrong on the last two.
2. They do not observe that ATVI is roughly 94% to 95% owned by Vivendi/Kotick, and several large institutions--the least of which owns ten million shares, and the bigest thirty-one million shares. See Yahoo numbers.
3. ATVI has produced a series of blockbusters, from GH to COD to WOW, which have produced big bucks, but have failed to move the stock price.
4. Did somebody who posts on this board sell 260,833 option calls at Feb. $13. ???
5. When those options were sold in October (?), they were hailed as a bonanza, bullish sign for ATVI. Actually, they were--and are--the kiss of death. They are worth about five cents/share.
6. Stop thinking small and try to imagine what you would do if you owned 15 million shares of ATVI at about $1. per share. Would you sell, and pay the taxes, or would you hold, establish a trading range you could control, and make money by selling options in both directions?
7. What do you suppose the big owners are doing? Look to options for a key to ATVI.
Over the past 22 months, I have been able to sell ATVI and buy the following companies for less money--GE, BAC, VALE, F, C, and CZZ. And ATVI is still locked in the $10-$12 trading range, where the owners want to keep it.
I have 1500 shares out on Jan $12.50 options, which will likely expire worthless, so I guess I am following the lead of the big boys--sell covered calls, make sure they expire worthless, in both directions, and whet the enthusiasm of small investors by touting the "can't miss" virtues of the next blockbuster.
I just don't buy it anymore, but who knows?
Cheers and best of luck,
Geman, check my previous comments about options.
Tomorrow 64,520 call contracts will expire worthless. 6.45 Million shares will stay with their present owners.
That will free up the share price to start climbing in anticipation of great earnings. (It has already started).
If you look at the history of recent profit reports you will see that at best it will get small pop, and then a big drop, even when they beat expectations,for the life of me I can't understand why, but that doesn't change the fact,
that is why I finally sold my shears in frustration at 12.50 a few weeks ago.
Good luck to you all, who knows maybe this time will be different,but recent history suggests otherwise.
If you had told me a week ago we would be close to hitting the 200 day ma at 11.36 i would of laughed. When the NPD numbers hit I actually thought that it was somewhat positive but it just sank us. NPD is a joke, it worked when all sales came as physical media but that's just one piece of the pie now. I am going to download every product blizzard pumps out, but that isn't accurately depicted in the NPD numbers. They are just guessing, wish they would just do away with the report. I like how they actually said that the fourth quarter was great and that 2011 should show an uptrend in video games, but this stock has tanked for days on the news. Obviously no one should fall in love with a stock, but I just can't bring myself to sell this POS because ATVI's earnings in Feb are going to be beyond rock solid, best ever. If that's the case and the market is at near term highs I don't see why this stock can't break 12.50 and above. ATVI grew in a video game market downtrend, imagine what they will be able to accomplish when the industry uptrends. My two cents...
Certainly wasn't my intention to bash you. Too many posts lacking any coherence to bash someone that posts intelligently enough.
Funny enough though that jp'bash' is a combination of my initials and location.
Cheers to you as well.
I have mixed feelings about oldcastle's premise. For example, if he really bought in 2003, he may be sitting on a 6-bagger right now. Not bad for the lost decade! I bought my first ATVI in 2006, and have a double. I have also bought during the recession under $10, so that's doing fine in my book, too.
I do agree, however, with the idea that ATVI is a value stock, rather than a growth stock. Redzombie's post shows how murky the picture really is. What is ATVI's P/E? It is 40, if you look at Yahoo's summary quote. Yet the forward P/E is 14. Which is more important?
There is no doubt that video games are a growing sector. As more generations grow up with them, they will continue (at least, some will) throughout their lives. And, as computing capability gets better, the experience becomes more compelling. (anyone played a game in 3D yet?)
But, the industry is also cyclical. The interesting point is that it's not so much the economic cycle, but a technological one. Granted, the industry has not escaped the recession unscathed, but Call of Duty doesn't seem to have noticed the recession at all. Rather, ATVI--when looking through the lens of trailing P/E--has been paying for the development necessary for the current generation of consoles and the new generation of Battle.Net. The good news is that this cycle is predictable--they announce it! (unlike economic cycles) Tactically, the good news is that the current generation looks like it has some legs, as devices like the Kinect keep consoles relevant. This means we can enter the phase where we can reap the rewards. Games are a hit-based business, so ATVI has to keep delivering, but once the trailing P/E starts showing 14 as well, the investment thesis will get clear in a hurry, and people playing a channeling strategy with options will get soaked.
Sadly, I am beginning to agree with your position.
The opposite side of the coin is that I just did an off-the-cuff analysis of what revenues will be when the company reports and I have them nearly 10% higher than the highest of what Yahoo Finance reports.
Black Ops: $1.16B (conservatively)
WoW/Starcraft II: $1.31B (from recent industry stats)
Gives us $2.4B
This puts us $80M above the average estimate. With all the other products the high estimte of $2.63 easily falls and a $2.8B-$2.9B range is likely and topping $3B wouldn't be a complete surprise.
Yet...59% insider ownership is an issue. All long-buyers can hope is they decide to give themselves (and us in the process) a nice dividend.
Am holding with my fingers crossed until the Feb 9th report and then will re-evaluate the hold vs. the where would I rather have my $ options.
Profile, know that my own sadness is as great as your own.
I knew this company as a hell-for-leather growth stock that had the audacity to challenge $50 to $70. ERTS.
And they won that battle, but they lost the war.
The "merger" was clearly a buy-out, and now ATVI is a value stock, and you are correct in stating that the best we can hope for is a decent dividend--part of the definition of value stocks.
Earnings will be spectacular--as you suggest--but will be off-set by higher expenses (from Vivendi, Blizzard and Activision), plus those one-time-only expenses which have become the lethal unknowns of several past reports.
The profits from Guitar Hero were spent on paying for the "merger."
Before then, shareholders were assessed the cost of re-stating earnings
because management could not read a calendar!
So now, with present ownership, we have become a value stock. We hope for a nice dividend, as you say.
That is far beneath the potential inherent in this franchise, and far beneath what many of us expected when we bought this stock based upon the numbers and the apparently valid scenario for growth.
The growth has gone to the black hole called Vivendi, and we are left with the eternal hope and expectation that the next quarter, the next blockbuster, will result in profits for the average stockholder.
Cheers and best regards,