Activision Blizzard, Inc. (NASDAQ:ATVI) has taken huge steps also by signing a deal with China-based Tencent to take the game Call of Duty online to the world’s most populous country. The appetite for video games in China is experiencing high rates of growth, and Activision is wise to make friends with the Chinese company. China is known to be very strict in allowing foreign Internet content, a good example being the restrictions placed on Facebook and Google.
Activision chose to use the online platform in delivering the Call of Duty game to China due to the high piracy rates on disc-based media. Tencent Holdings is a top Internet services provider, and is also often called the Facebook of China. This is an excellent partnership, which will see the world’s largest video-game maker sell to the world’s most populous country via a more secure platform, free of piracy.
The announcement of the new Call of Duty Ghosts has been a highlight in the media, receiving positive reviews, and even overshadowing the announcement made by Microsoft about XBox One. The transition to a new-age console was always going to be a challenge, but the signs thus far remain positive for Activision Blizzard, Inc. (NASDAQ:ATVI). Now we can wait for Call of Duty Ghosts to sell online in China. Having already managed $1 billion in sales within the first 15 days from the Call of Duty, it will be interesting to see how the Ghosts version fares, given the addressable market in China.
The Bottom Line
Activision Blizzard, Inc. (NASDAQ:ATVI) is currently trading at about 15x in P/E. The company’s forward PE for next year is projected at about 14.90, which indicates that the stock’s price is expected to grow at nearly the same rate as EPS. The company’s PEG ratio is estimated at 2.33 for the next five years, compared to the industry average of 1.67.
The analysts expect the company to report $0.85 in earnings for 2013, which would be an increase of $0.13 per share from 2012, or about 18% upside. This produces a projected stock price of about $17.91 per share. Therefore, Activision is not yet done with its current rally. Given the company’s recent history of outperforming analyst estimates, the earnings could be higher than expected, which means more upside. Additionally, having widened the window of opportunity by tying a deal with Tencent, the company should realize incremental revenues and earnings going forward.
Nicholas Kitonyi has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard and Take-Two Interactive . The Motley Fool owns shares of Activision Blizzard. Nicholas is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Activision Blizzard’s Rally Is Far From Over originally appeared on Fool.com and is written by Nicholas Kitonyi.
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