Activision Blizzard, Inc. (ATVI), Zynga Inc (ZNGA): Should You Follow Management’s Big Buy in This Video Game Maker?

In its latest fiscal year, GameStop Corp. (NYSE:GME) reported mixed financial results, with a 7% drop in overall revenue, but a 10.9% increase in adjusted operating income. The company’s top-line growth was hurt by a lack of new industry titles and lower hardware sales, as consumers wait for new consoles, including Sony’s PlayStation 4 that is expected to launch in the fourth quarter of 2013. However, GameStop continued to generate strong operating cash flow, due to a strong margin from its large pre-owned segment, allowing it to continue investing in its online capabilities.

The bottom line

Activision certainly enhanced its long-term value through its recapitalization deal, but it has rising competition from online developers and the makers of the console devices themselves. A better bet may be GameStop, a distributor that is moving its business online and benefits from an increase in the gaming population, regardless of which console or game is the flavor of the day. It is one for the portfolio.

Robert Hanley owns shares of GameStop. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard and GameStop.

The article Should You Follow Management’s Big Buy in This Video Game Maker? originally appeared on Fool.com and is written by Robert Hanley.

Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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