Zacks bull of the day: Activision Blizzard

The company has a big reach in the video game industry, and is producer of some of the sector's most famous products.

By Zacks.com Sep 10, 2013 4:42PM

Image: Teens with MP3 player (© RubberBall/SuperStock)By Eric Dutram

 

Video games have become a huge industry, as both console gaming and mobile apps remain quite popular with consumers. In fact, the video game industry was recently valued at $67 billion, while growth is expected to put the total valuation at $87 billion in 2017.


Given these figures, it is pretty clear that the trend is quite solid in the video game space and that an allocation to this growing market may not be a bad idea.


One targeted way to do this is with one of the top makers of games currently on the market, Activision Blizzard (ATVI).


Activision Blizzard in Focus

ATVI is a company that has a big reach in the video game industry, and is  producer of some of the segment’s most famous products. This includes the Call of Duty, Guitar Hero, and Warcraft franchises, in addition to a number of mobile games with operations across the globe. 


The company has become a pretty big name thanks to many of these titles, pushing this California-based company to a $19 billion market capitalization. And with some new launches expected -- a fresh Call of Duty game is due out soon while new consoles are coming online too -- a further push up the charts is not out of the question.


ATVI Fundamentals

This is especially true when investors consider the analyst outlook for the company. Estimates have been jumping higher as of late, as both the current year and next year periods haven’t seen a single revision lower.


Meanwhile the magnitude of these revisions has been absolutely incredible, particularly when focusing on the next quarter and next year time frames. For these two in particular, the consensus has risen from 57 cents a share to 77 cents a share in the past two months, while the next year figure has jumped from 90 cents to $1.18/share over the same period.


With this kind of increase, some investors might be concerned ATVI might have difficulty in living up to the hype, but the recent earnings history suggests otherwise. The company has thoroughly crushed estimates lately, beating out the estimate by close to 50% over the past four quarters.

 

Clearly the company is firing on all cylinders and is well positioned to take advantage of the positive trends in the video game industry. Analysts seem to agree, and that is why we have given ATVI a Zacks Rank #1 (Strong Buy).


Bottom Line

This strong buy rating means that we are looking for ATVI to continue its run and outperform other stocks in the near term. Plus, with its outperform Zacks Recommendation, the longer term future is looking bright for this company as well.


If you are looking to get in on the quickly growing video game industry, but don’t know where to begin, consider starting with an allocation in ATVI. Activision Blizzard has several of the industry’s most popular franchises, and with new titles and gaming systems on the way, growth could definitely be ahead for this industry titan for years to come.


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