Activision Blizzard (ATVI) has seen a big run-up in 2013 thanks to high hopes for its Destiny video game offering. ATVI stock is up more than 50% since January, thanks in large part to a 20% surge at the end of July on news that it would buy out most of the ownership stake of French electronics giant Vivendi (VIVEF) for nearly $8.2 billion.
But Activision stock has been rolling back ever since the Vivendi buyout news. And investors who haven’t sold ATVI stock yet might want to consider doing so now that the success of Destiny has been largely baked into shares.
There is the risk of missing out on future upside in ATVI, sure. Some predicted that Activision’s Destiny could be a much-needed billion-dollar series for ATVI, building momentum as older franchises like Call of Duty and World of Warcraft lose momentum. The makers of Microsoft (MSFT) smash-hit Halo are behind the Destiny launch, and that has a lot of gamers excited about the potential.
But greater development costs for Destiny have started to give some analysts pause, and most investors are already modeling ATVI stock prices based on a launch that sells 9 million to 10 million copies in 2014 when the game hits stores.
A lot can happen in the next year, and a 50% pop is nothing to sneeze at in this stock. So investors should consider moving on.
After all, video game stocks in general are a bit overheated. Electronic Arts (EA) is up more than 80% this year, and there are high hopes riding on the current Madden 25 launch. Take-Two Interactive (TTWO) is up almost 70% on anticipation of September’s release of the highly anticipated Grand Theft Auto V. Sony (SNE) has soared about 80% YTD in part thanks to expectations of a strong PlayStation 4 console launch, retailer GameStop (GME) has doubled … all in all, it’s been a great year.
In fact, all of these stocks might be ripe for a little trimming; it’s not just ATVI that has some froth right now.
Investors need to not fall into the trap of listening too much to the hype of gamers and video game magazines. Yes, these upcoming releases could be huge for fans … but the optimism seems already baked into stocks like Activision.
That means it’s time to sell ATVI and lock in your profits, then move on to new opportunities.
Related Reading on Activision’s Destiny:
- ATVI soars on Vivendi buyout news. (Bloomberg)
- Credit Suisse cuts ATVI earnings outlook on Destiny development costs. (Barron’s)
- Could Destiny be a billion-dollar series for Activision? (Gamespot)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.