Take-Two Interactive Software, Inc (NASDAQ:TTWO)
With earnings per share currently resting at a dismal -1.51, Take-Two may not be the prettiest girl at the dance, but there may still be some upside here. Take-Two impressed analysts with its strong push this past quarter, led by the stellar performance from NBA 2K13 and Boarderlands 2. And the near future looks bright as the company plans to release the newest edition of it most popular franchise, Grand Theft Auto V. But, there seems to be better options out there—Activision for one– and I’m far from sold on Take-Two being a profitable move for investor’s long term.
Looking for Guidance
As a new investor, one of the best strategies is to find out what others, qualified others, are saying about a particular stock.
Demitrios Kalogeropoulos of The Motley Fool suggests that its Activision’s ability to produce quality franchises — such as Skylander and Call of Duty– that has propelled it into the developing elite. It should also be noted that Activision’s stance on stock repurchasing and dividends have investors drooling at the mouth.
Not to mention the Motley Fool invests in Activision Blizzard. And they seem to know what they’re doing, right? Of course it’s not enough to just know that somebody else owns it. If things do start to get a bit bumpy, you need to know whether or not it’s time to jump off. For that reason it’s always a good practice to understand why The Fool—or anyone else for that matter—is hot or cold on a particular stock, and do your own homework.
Risks
Call of Duty has, for the first time since its inception in 2004, sold fewer units to Xbox and Playstation users than the year before. Is that a sign that Call of Duty is running out of ammunition? I think that’s doubtful, but the broader concern is Activision’s ability to maintain its current overall rate of growth. There are plenty of options here for doing just that– cutting costs, selling more by making new games, increasing the price of franchise games, or expanding its market –but executing any one of them well is far from a guarantee.
It does, however, look to me like it’s off to a fast start on at least one of those. Activision has already begun expanding its market by leveraging games like Skylander Giants to reach a younger audience. I think that’s a pretty brilliant move, because if there’s one thing kids do that 20-somethings don’t, it’s buy merchandise. And they buy lots of it. Through January 2013, Activision has sold over a 100 million Skylander toys worldwide.
Finally, as a video game publishing company, Activision is dependent upon the success of console makers like Microsoft, Sony, and Nintendo. And with the somewhat disappointing performance of the Wii U, Activision will have to scramble to make up lost profit opportunities. Looking forward, investors should keep an eye on rumors that te new Xbox and Playstation consoles may change their gaming format, rendering old games completely useless. This could potentially mean huge profits for developers.
Verdict
I may not be a gambler, but when I do make a bet I gamble on large, well designed companies with a proven track record and a steady stream of profits. Or is that not gambling? Either way, I’ll bet on Activision Blizzard to leverage its key franchises and expand its market, making it a prime investing candidate. I’m going to give two thumbs up to Activision in my Motley Fool CAPS portfolio, so you can track how this works out for me.
Sorry Moms, but this video game giant is no waste of time.
The article Is Activision Blizzard Running Out of Ammunition? originally appeared on Fool.com and is written by Dave Koppenheffer.
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