What a bloodbath. Apple fell through its February ’08 low a little while back and the stock is now “broken” as the chart-meisters would say. Right now it’s flirting with the magic century-mark, which is always a psycological watershed. Where will it bottom?
Who knows. What I do know is that I’d rather wait until it’s reasonably clear that we’ve reached a new support level before wading in. I’d rather pick it up at $110 knowing there’s a new support level in place than buy at $95 without any clue of where it will bottom.
And what about our friends at ActivisionBlizzard? At this very moment in time, it is trading below the $13.75 buy-out price Vivendi ponied up to make this merger happen. (It was actually $27.50 but then the stock split.) And Blizzard’s expansion for World of Warcraft (called Wrath of the Lich King) is due out in a month or so. That’s sure to be a blockbuster.
So this must be a great time to buy right?? Ehhh, maybe. Maybe in hindsight it’ll prove to be a stroke of brilliance, but according to cash flow models, even ones with quite optimistic assumptions built in about the company’s growth prospects, this thing is worth $12.50.
One thing I will say that makes me bullish on the ActivisionBlizzard play is that the games it produces are the cheapest forms of entertainment out there. That’s a strong plus during a recession. You don’t have to drive anywhere. You don’t pay through the nose for popcorn. And the more you play, the cheaper it is.
Apple, on the other hand, sells sexy (and expensive) products which are typically the first thing that people jettison from their budget during hard times. For me, the key with Apple is whether it can make in-roads to the business hand-held user in a significant way, taking market share from Blackberry, and also whether IP T.V. is a hit and people start suring the web via their TV’s instead of PC’s. Both of those are fairly big question marks at this point.
Back to ActiBlizz…the games it (and others) make allow people to escape from the troubles of their every day lives. During a recession, people are looking to escape more than ever, but they have to do it on the cheap. That seems to be a great argument in favor of these stocks. I’m looking closely at the Wrath of the Lich King release. If it has huge sales and leads to new subscriptions, in my view that will provide a lot of credence to this argument and the gaming companies will do well during the recession.
Having said that, Electronic Arts has just had two massively successful releases in Spore and Warhammer Online, and that stock is trading at its five year low. So is that a bad sign, or an opportunity? Hmmmm…..
[…] the price Vivendi paid to acquire majority control of the merged entity. As I’ve mentioned before, cash flow analysis pegged ATVI at about $12.50. Clearly the run up in share price after the […]
[…] the price Vivendi paid to acquire majority control of the merged entity. As I’ve mentioned before, cash flow analysis pegged ATVI at about $12.50. Clearly the run up in share price after the […]