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Bloomberg Businessweek recently noted in Activision, the Anti-Zynga , that Activision Blizzard, Inc. (NASDAQ:ATVI) will release Skylanders Giants, the sequel to its highly successful video game Skylanders Spyro's Adventure, on Sunday, Oct. 21.
According to the author, analysts estimate the $75 video game will add $280 million to ATVI's bottom line in the fourth quarter, despite a 5% year-over-year drop in the number of domestic gamers. The author insists the decline in U.S. players was influenced by "light PC gamers, comprising people who play a few minutes a day on Facebook Inc (NASDAQ:FB) and other PC-based platforms." However, ATVI's CEO Bobby Kotick chose to buck the Zynga Inc (NASDAQ:ZNGA) trend of "'casual' games played on social media sites," and instead focus its time and money on games that would keep the attention of "fickle social media players." As Kotick explains, "You have to bet really big to get through not just the clutter of video games, but all forms of entertainment."
As a result, ATVI was able to develop the Skylanders series, which includes a memory-chip system, so players can battle it out on different consoles. Plus, the video game is cashing in on corresponding toy action figure sales, and Kotick hints that plans are in the works for books, clothing, television shows, and movies based on the characters.
The author's bottom line: "By bucking the now-slowing social gaming trend, Activision was able to create Skylanders, a nearly $1 billion a year franchise."
Technically, ATVI has had a tough time on the charts. On a year-over-year basis, the shares have surrendered more than 14%. More recently, ATVI has been contained by its descending 10-day moving average -- a trendline that has ushered the stock lower since late September. The equity's price action was further hindered following an Oct. 8 Dow Jones Newswires story , which reported the company's popular World of Warcraft series had been hacked, just two weeks after a major update to the game. In fact, ATVI tagged a new annual low of $10.94 on Wednesday, Oct. 9.
Despite ATVI's dreary technical backdrop, sentiment around the Street remains firmly in ATVI's favor. In the options pits, the stock sports a 50-day International Securities Exchange (ISE)/Chicago Board Options Exchange (CBOE)/NASDAQ OMX PHLX (PHLX) call/put volume ratio of 5.55. This ratio ranks above 89% of similar readings taken in the past year, indicating bullish bets have been scooped up over bearish at an accelerated clip in recent months.
This trend has translated into a call-skewed Schaeffer's put/call open interest ratio (SOIR) of 0.24, which shows call open interest more than quadruples put open interest among options expiring within the next three months. What's more, this ratio ranks in the lowest percentile of its annual range, suggesting short-term speculators are more call-heavy now toward ATVI than at any other time within the past year.
The optimism is evident outside of the options arena, as well. No fewer than 16 out of 20 analysts maintain a "strong buy" recommendation toward the stock, with not a single "sell" to be found. Plus, the consensus 12-month price target of $15.64 not only represents a brazen 43% premium to today's nadir, but also territory ATVI has not explored in four years. Should the stock continue to struggle on the charts, a capitulation by the brokerage bunch could apply additional selling pressure to ATVI in the near term.
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