Companies making new highs tend to keep making new highs. For some reason that does not give me a lot of confidence in buying a stock that has been up solid for two weeks but I am afraid we are going to see a Nvidia type stock sprint and I do not want to miss it.
NEW DIRECTIONAL CALL PLAYS
ATVI - Activision Blizzard - Company Profile
Activision Blizzard, Inc. develops and publishes online, personal computer (PC), video game console, handheld, mobile, and tablet games. The company operates through two segments, Activision Publishing, Inc. and Blizzard Entertainment, Inc. The company develops, publishes, and sells interactive software products and content through retail channels or digital downloads; and downloadable content to a range of gamers. It also publishes subscription-based massively multiplayer online role-playing games; and strategy and role-playing games. In addition, the company maintains a proprietary online gaming service, Battle.net that facilitates the creation of user generated content, digital distribution, and online social connectivity in its games. Further, it engages in creating original film and television content; and provides warehousing, logistical, and sales distribution services to third-party publishers of interactive entertainment software, as well as manufacturers of interactive entertainment hardware products. The company serves retailers and distributors, including mass-market retailers, consumer electronics stores, discount warehouses, game specialty stores, and consumers through third-party distribution, licensing arrangements, and direct digital purchases in the United States, Canada, Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South Korea, China, and internationally. Company description from FinViz.com
Activision reported Q4 earnings of 92 cents that beat estimates for 73 cents. Revenue of $2.45 billion beat estimates for $2.35 billion.
The new Overwatch game was the fastest Blizzard title to hit 25 million registered players. Monthly active users (MAU) rose 5 million at Activision to reach 51 million. Bllizzard's MAU fell 1 million to 41 million but set a record for Q4. Kind Digital users fell from 394 million to 355 million. Since King Digital is phone games the numbers tend to be volatile. Users spent 43 billion hours playing ATVI's suite of games in Q4 compared to the 45 billion hours peopls spent watching Netflix.
Shares spiked despite weak guidance. They guided for Q1 for $1.05 billion and earnings of 18 cents. The street was looking for $1.2 billion and 31 cents. For the ful lyear they guided for $6.3 billion and $1.85 in earnings. That missed street estimates for $6.68 billion and $2.03. Fortunately, ATVI normally guides low and then crushes the estimates when they report.
Earnings May 11th.
Activision has not just one or two but seven game franchises worth more than $1 billion each. It is hard to argue with success. Also, the gamers currently playing those games are always waiting for the next version or the next big game that takes technology a step further. The gaming business is one of massively recurring revenue. They not only sell new game but expansion packs to existing games, maps, tools, and other game content that helps users better enjoy the experience.
Call of Duty, Overwatch, World of Warcraft and Destiny are cash cows that generate steady streams of recurring revenue. More than 74% of ATVI's $6.6 billion in 2016 revenue was from subscriptions, in-game purchases and other digital items where the ongoing costs are next to zero. Five years ago that number was 34%.
With $2.2 billion in annual free cash flow the company can continue to develop new content and look for other acquisitions to broaden the brand.
The company is now branching out into E-sports with an Overwatch League. There are tens of thousands of gamers that will pay just to watch a pro play their favorite games. Having those pros compete with other pros is even better.
Activision is making new highs but with everything they have going for them, I believe they will keep making new highs. The options are cheap so we do not have much to lose if the stock or market suddenly takes a turn for the worst.
Buy May $50 call, currently $1.99, initial stop loss $46.45
NEW DIRECTIONAL PUT PLAYS
No New Bearish Plays