Activision Blizzard: A buyback bet
This leading maker of video games is a new addition to a buyback-based model portfolio.
We previously bought Activision Blizzard (ATVI) in our buyback portfolio last June, and sold it in September. It has since floated to the top of our research screens again.
Activision is a leading worldwide developer, publisher and distributor of interactive entertainment and leisure products, headquartered in Santa Monica, Calif.
You’ll recall that the company is known for “Call of Duty: Black Ops,” but Activision, the master of finding or creating blockbuster brands, has also just released the new “Spider-Man: Edge of Time,” with an all-star voice cast including Val Kilmer.
And set for a timely November release is “Call of Duty: Modern Warfare 3,” which gives it a chance to rule for the critical holiday shopping season.
To keep the creativity flowing, it just announced a call for submissions for the second Activision Independent Games Competition – an award program designed to foster innovation that is open to all independent developers with headquarters in the U.S.
The winning studio or individual gets funding for game concept, titles in development or completed works.
With 2010 sales exceeding $18.5 billion, the video game industry is serious business, and some video game titles are so popular that their sales eclipse Hollywood blockbusters.
For example, in just 6 short weeks, Call of Duty: Black Ops had sales exceeding $1 billion. Activision has a number of titles that either defined or dominated their genres.
These games include Tony Hawk, Guitar Hero, Call of Duty, World of Warcraft, Diablo and StarCraft. In all, Activision has five of North America’s top 10 best-selling games of all time.
Over the past 12 months, Activision Blizzard generated $1.15 billion cash while it booked net income of $656.0 million, which means it turned 24.2% of its revenue into free cash flow.
In the last 12 months, management has reduced shares outstanding by 6.7%. Our recommendation is to buy ATVI.
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