What Are the Greatest Risks for Activision Investors?

The world's largest home entertainment software maker, Activision Blizzard (NASDAQ: ATVI  ) , has seen its fair share of bullishness lately. Indeed, it finds its shares up nearly 40% since the beginning of 2013 after posting better-than-expected fourth-quarter and full-year results in early February. Going beyond that, the company has another exciting year in store for it.

How will Activision keep up the positive momentum for its shareholders? To answer the question, the Fool compiled a research report to break down the each critical facet of the Activision investment thesis. We've included an excerpt from one section below for our readers. Enjoy!

Risks
Games peak in popularity, and franchises fade.

Investors have seen this when Activision Blizzard unplugged its once smoking hot Guitar Hero franchise. It's safe to say that World of Warcraft also peaked at 12 million players in 2010. Despite the rollout of generally well-received expansion packs, gamers have been stepping back in nearly every passing quarter. Tactics to combat the net defections -- including making its first 20 levels "free to play" to hook new games and giving away copies of Diablo III (a $60 game) to get players to extend their subscriptions -- have only softened the slide. Through September 2012, Activision Blizzard continues to entertain more than 10 million World of Warcraft players, though it wouldn't be a shock to see that slip into the seven figures in 2013.

Investors need to take this in stride, because one day it will be Call of Duty, Skylanders, Starcraft, and Diablo on the way out.

Activision Blizzard has proven that it can drum up new franchises to replace the negative trending properties, but clearly this is a risk in any gaming company. Players are fickle.

It also doesn't help that the gaming industry itself has been moving away from the traditional console, handheld, and PC games that Activision Blizzard excels in. Smartphones and tablets are booming at a time when PC sales have stalled and console sales are falling. If the trend continues, Activision Blizzard will need a bigger presence on the portable gadgetry that is garnering the attention of casual users that used to play it games.

Another great gamer?
Zynga's post-IPO performance has been dreadful, and investors are beginning to wonder if it's "game over" for this newly public company. Being so closely tied to the world's largest social network can be a blessing and a curse. You can learn everything you need to know about Zynga and whether it's a buy or a sell in our new premium research report. Don't even think about picking up shares before you read what our top analysts have to say about Zynga. Click here to access your copy.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2275700, ~/Articles/ArticleHandler.aspx, 9/2/2014 8:29:52 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 17,067.56 -30.89 -0.18%
S&P 500 2,002.28 -1.09 -0.05%
NASD 4,598.19 17.92 0.39%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2014 4:00 PM
ATVI $23.74 Up +0.20 +0.85%
Activision Blizzar… CAPS Rating: *****

Advertisement