In the footsteps of fellow Motley Fool Stock Advisor pick Electronic Arts (David Gardner tapped both), Activision reported a blowout holiday season. Underground reigns king. EA's Need for Speed Underground and Activision's Tony Hawk's Underground (THUG) both hit big on Sony
More impressively, Activision had three of the five best-selling titles in the quarter, including two brand new franchises -- True Crime: Streets of L.A. and the leading PC game, Call of Duty.
Those successes drove third-quarter revenue 34% higher year over year to $508.5 million. Meanwhile, net income soared 74% to $77 million, or $0.79 per share -- pounding the company's own December forecast of $0.67. Not only did Activision raise fourth-quarter and full-year expectations, it forecast better-than-expected full-year 2005 earnings.
Until recently, I wasn't crazy about Activision. For me, the uneven quality of its games made for a weak brand -- especially compared to Japanese developers Capcom, Namco, and Konami
Clearly, with $552 million, over $6 per share, in cash, Activision, along with EA and Take-Two
Not surprisingly, Activision jumped 8% to $19.44 in after-hours trading yesterday. Even so, with its strong cash position and all the options that affords, I don't hate Activision here at just over 20 times fiscal 2005 earnings -- even as we near the end of the current console cycle.