The limit order I had sitting on my account to pick up some additional Activision (ATVI) shares triggered today at $10.78 — that happened to be very close to the low of the day, but obviously ATVI is having more than its share of headline risk lately so that may very well not be the low for long.
I continue to think that Activision is cheap given its dominant position in a core entertainment business, and the combination of hit franchises and stable subscription income gives me some confidence that they’ll continue to be industry leaders. The big news of late is largely the fight over the Call of Duty franchise and development team, which has some parallels to the founding of Activision, as the ATVI founders walked out of Atari and started their own company when they realized that almost all of Atari’s money came in from the games they had developed while they were stuck with middle-class paychecks. Of course, the parallels are not perfect — game development teams are like Hollywood talent now in some ways, and the studio behind Call of Duty was getting huge bonuses, though one of the fights is over whether the bonuses were paid correctly (that’s a simplification).
So Activision will be tied up in court over the future of this particular hit franchise, and over possibly another few hundred million dollars in damages, probably for quite a while. Throw in the fact that the Supreme Court will consider (next term) California’s appeal to save their restrictive new law banning violent video game sales to minors, and you can see why recent news flow has folks worried about video games, and worried about Activision Blizzard in particular.
That, of course, is why ATVI is cheaper than you would expect for the dominant company in a growth industry. And that’s why I left my buy order out there and let it trigger today, unless I think their business has materially changed for the worse — which I don’t right now, though I’ll be watching the Call of Duty lawsuits and listening to see how relations are with their other studios, and checking to see how Warcraft and Starcraft are doing in their coming conference calls — I’ll hold on to these shares in the belief that the business is still ...