Activision Blizzard Stock Falls As SEC Gets Interested In The Company’s Work Culture
Shares of Activision Blizzard continued to move lower after recent reports indicated that SEC had started an investigation of the company’s workplace culture. Earlier, a union filed a federal complaint regarding the company’s work culture while California sued the company for the same reasons.
Activision Blizzard stated that it was working with regulators to resolve the complains that it had received. The company has recently announced that Julie Hodges from Disney would become Chief People Officer, effective September 21, as Activision Blizzard tries to solve its problems with the workforce.
The stock has been under pressure in recent months as investors were worried about the company’s problems on the HR front. Activision Blizzard stock traded close to the $100 level at the beginning of June but found itself under strong pressure and moved below the $75 level.
What’s Next For Activision Blizzard Stock?
It is not surprising to see that Activision Blizzard stock is under pressure due to problems on the HR front as workforce is the key asset of any company that makes video games. Improving the situation may take time while the company may also face costs due to lawsuits.
Interestingly, analyst estimates have improved in recent weeks. Currently, analysts expect that Activision Blizzard will report earnings of $3.83 per share this year and $4.4 per share in the next year, so the stock is trading at roughly 17 forward P/E which is an attractive valuation level in the current market environment.
However, it remains to be seen whether value-oriented traders and investors will rush to buy Activision Blizzard shares as workplace changes take time while the stock has significant headline risks. In addition, there are plenty of stocks with a strong upside trend available at the marketplace right now, so Activision Blizzard stock will certainly need more positive catalysts to attract more investors and change the current downside trend.
And this month we look at my best stocks to buy now for September 2021. Keep in mind, I like to use a lot of data in my process and this isn’t personalized advice.
But let’s touch on the market first. The big indexes are chugging higher but are largely being propped up by a handful of the biggest stocks. The data under the surface is deteriorating quickly. The Big Money Index is falling rapidly indicating more sellers than buyers. It’s often a leading indicator, so recent weakness isn’t surprising.
Pullbacks are part of the game. In fact, that’s an opportunity for long-term investors. Patience is the key to investing.
For MAPsignals, we focus on Big Money buying the best stocks. We find that oftentimes how a stock trades can alert you to the forward fundamental picture more than just looking at a company’s financials. I like the odds in my favor when looking for the highest quality stocks.
When we decide on the strongest candidate for long-term growth, we consider many fundamental and technical considerations.
Here we see great 1 and 3-year sales and earnings growth. We also see a hefty profit margin. Just for fun, juice is good, so-so is ok, and not ideal is underwhelming:
Source: MAPsignals, FactSet
To see if Big Money is plowing in, we can look at the MAPsignals Top 20 charts. Below are all the top buy signals TMO has made the past few years. Blue bars are showing that Thermo Fischer was likely being bought by a Big Money player according to MAPsignals.
When we see a lot of blue signals, we call it the stairway to heaven:
Next up is Intuitive Surgical, Inc. (ISRG), which is a leading surgical robotics maker. Imagine being a surgeon in one country operating in a patient in another! This company makes it theoretically possible.
Let’s take a peek under the hood:
Source: MAPsignals, FactSet
While the stock has outperformed recently, look at the long-term picture. These are the top buy signals ISRG has made since 2015. Clearly the Big Money has been into it for years:
Another growth name to consider is Activision Blizzard, Inc. (ATVI). The video game maker has seen negative press regarding work culture and other assorted stories. But it doesn’t change the monster business they do.
Looking at the fundamental picture we see a strong history of 1 and 3-year sales and earnings growth and a chunky profit margin:
Source: MAPsignals, FactSet
Below are the big money signals Activision has made since 2015. This stock has been a magnet for Big Money with one notable rough patch. Clearly, they turned it around and have been in a strong long-term uptrend:
Number 4 on the list is Generac Holdings Inc. (GNRC), which is an industrials leader making electrical products such as their popular home generators. The shares have been in juice-mode for years.
Check out the fundamental picture. For GNRC we see growing sales and earnings:
Source: MAPsignals, FactSet
Below are the big money signals that GNRC has made since 2015. Notice that it’s only recently come to Big Money attention in late 2019:
Our last growth powerhouse is PayPal Holdings Inc (PYPL), which is a specialty finance company focusing on digital payments.
This company boasts strong fundamentals with great 1 and 3-year sales and earnings growth. A gross profit margin of 55% is awesome.
Source: MAPsignals, FactSet
Below are the big money signals PayPal has made since 2016. You can see how powerful the performance has been:
The Bottom Line
TMO, ISRG, ATVI, GNRC, & PYPL represent my best stocks to buy now for September 2021. Given the strong historical revenue & earnings growth, and multiple big money buy signals, these stocks could be worth extra attention, especially if they pull back with a likely pending sell-off in the market.
Activation Blizzard Inc. (ATVI) reports Q2 2021 earnings after Tuesday’s closing bell, with analysts expecting a profit of $0.75 per-share on $1.88 billion in revenue. If met, earnings-per-share (EPS) will mark no improvement over identical results in the same quarter last year, when gamers were emerging from lockdowns. The stock bounced off a multi-month low in May after a mixed Q1 report but the uptick failed, with downside since that time reaching the lowest low since December 2020.
Toxic Workplace Allegations
June 2021 video gaming spending rose just 5% year-over-year, failing to overcome tough comparisons after last year’s pandemic sales windfall. Social distancing and the run-up into new console releases by Sony Group Corp. (SONY) and Microsoft Corp. (MSFT) generated the most industry excitement in ages, translating into higher stock prices and extremely overbought technical readings that are partially responsible for year-to-date losses in top sector plays.
Activision is also dealing with fallout from sexual harassment allegations at Blizzard’s “World of Warcraft”, one of the hottest titles of the 21st century. That game no longer tops the sales charts but the toxic culture being exposed by unit employees could damage the corporate brand, which includes many titles directed at female players. California just filed suit, citing a culture of “constant sexual harassment”, so this story is likely to attract attention and potential disgust into 2022.
Wall Street and Technical Outlook
Wall Street consensus remains overly bullish, with a ‘Buy’ rating based upon 24 ‘Buy’, 5 ‘Overweight’, and 3 ‘Hold’ recommendations. Price targets currently range from a low of $100 to a Street-high $145 while the stock is set to open Tuesday’s session more than $18 below the low target. This dismal placement highlights Main Street skepticism after 2020’s 56% return. In addition, analysts have been as quiet as church mice since the scandal broke, most likely because they have no clue how it will impact sales.
Activision topped out at 84.68 in October 2018 and got cut in half in the next four months. A slow but steady uptick reached the prior high in August 2020, yielding a pullback, followed by a December cup and handle breakout that posted an all-time high at 104.53 in February 2021. The subsequent decline completed a descending triangle breakdown after the sexual harassment news, also failing the breakout. None of this bodes well for the stock in coming months.
Amazon executives noted shifting consumer habits as the pandemic eases and people become more mobile. Amazon forecasted the next quarter’s sales at between $106 billion and $112 billion, compared to Wall Street expectations for right around $119 billion.
Amazon’s projections would still represent growth of +10% to +16%. Keep in mind, bears are also pointing to ongoing fears of supply chain hiccups, higher-trending inflation, and new coronavirus outbreaks. Earnings come at a busy pace again today with results from Caterpillar, Cerner, Chevron, CNH Industrial, Colgate Palmolive, Enbridge, Exxon Mobil, Johnson Control, and Procter & Gamble.
The worry on Wall Street is that this new normal rate of growth will be slower than many analysts and trading firms are forecasting coupled with higher inflation and or supply chain dislocations corporate profits could fall under some pressure or in this case be less than Wall Street is forecasting for the next few quarters. Bulls expect more consumer spending will shift from goods and pandemic-related services (delivery, video games, cloud/collaboration software) but are still betting on pent-up demand for things people missed out on during lockdowns, as well as goods and services that are currently in short supply.
Data to watch
Updated inflation data is also on tap with the ISM Manufacturing Index on Monday and the Services Index on Wednesday.
I have mixed feelings about SP500. There are a few signs of weakness. However, it might be the result of low summer activity. Advance-Decline Line is clearly bearish. Insider Accumulation is also not that strong. Moreover, the Volatility Index is very low and potentially it could bring a pullback. In any case, SP500 futures failed to close the week above Gann resistance. And that is also a negative sign.
The Federal Reserve policy is still supportive. But keep in mind, that SP500 has rallied around 100% since the pandemic bottom without any pullback. And the retest of key support zones near 4200 and 4000 is realistic.
On the other hand, the continuation of the rally is also possible but only if price sustains above 4400. If that happens, bulls will target 4500 and 4600 in extension.
The hallmark way we go about finding the best stocks…the outliers, is by looking for quiet Big Money trading activity.
Oftentimes, that can be institutional activity. We’ll go over what that looks like in a bit. But, the 5 stocks we see as long-term candidates are ATVI, SHOP, PYPL, GOOGL, & QFIN.
For MAPsignals, we believe the true tell on the near-term trajectory of the stock lies in the trading activity of the stock. The bottom line here is that oftentimes the manner in which a stock trades can oftentimes alert you to the forward fundamental picture more so than by simply looking at a company’s financials alone. We want the odds on our side when looking for the highest quality stocks.
Up first is Activision Blizzard, Inc. (ATVI), which is a leading gaming and entertainment firm. They have been cruising higher for years.
When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success with a few for ATVI being:
1-year performance (+36.17%)
YTD underperformance vs. NASDAQ ETF (-2.6% vs. QQQ)
Historical big money signals
Just to show you what our Big Money signal looks like, have a look at all of the top buy signals ATVI has made the past few years. That’s one strong uptrend. Green bars are showing that Activision Blizzard was likely being bought by a Big Money player according to MAPsignals.
It’s clear there’s a lot of green historically with this stock. That’s exactly what you want to see when looking for a great growth name. The lone red signal occurred during a broad market pullback:
On top of technicals, you need to look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Activision’s revenue numbers have been strong:
3-year sales growth rate (+6.09%)
3-year earnings growth rate (+196.28%)
Next up is Shopify, Inc. (SHOP), which is an ecommerce software company. The company has been a huge winner over the years.
When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success with a few for SHOP being:
1-year performance (+62.22%)
YTD vs. technology ETF (+4.83% vs. XLK)
Recent big money signals
While the stock has outperformed recently, look at the long-term picture. These are the top buy signals Shopify has made since 2015. Clearly the Big Money has been consistent for years:
On top of a great long-term technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Shopify has grown revenues massively:
3-year sales growth rate = +64.02%
3-year earnings growth rate = -63.12%
Another growth name to consider is PayPal Holdings, Inc. (PYPL), which is a leading digital payments company.
When we decide on the strongest candidate for long-term growth, we want to see a history of big money buying the shares. PayPal has that. Also, recent underperformance can be attractive:
1-year performance (+74.5%)
YTD outperformance vs. technology ETF (+6.79% vs. XLK)
Below are the big money signals PayPal has made since 2015. After the pandemic lows, it’s been moon-bound:
On top of a strong technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. PayPal’s growth rate is impressive. I expect more growth in the coming years:
3-year sales growth rate = +17.96%
3-year earnings growth rate = +36.06%
Number 4 on the list is Alphabet Inc. (GOOGL), which is the leader in online search amongst other growth areas. The shares have been in bull-mode the past couple of years.
When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success with a few for GOOGL being:
1-year performance (+72.37%)
YTD outperformance vs. technology ETF (+29.13% vs. XLK)
Historical big money signals
Below are the big money signals that GOOGL has made since 2015:
On top of the technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Alphabet has been growing nicely:
3-year sales growth rate = +18.06%
3-year earnings growth rate = +60.69%
Our last growth candidate is 360 DigiTech, Inc. ADR (QFIN), which is a leading Chinese finance firm. The stock has zoomed recently.
When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success with a few for QFIN being:
1-year performance (+322.5%)
YTD outperformance vs. financials sector (+231.7% vs. XLF)
Historical big money signals
Below are the big money signals 360 DigiTech has made since 2019. You can see how powerful the performance has been the past year:
On top of the technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, 360 DigiTech has grown revenues massively over the past few years:
3-year sales growth rate = +504.91%
3-year earnings growth rate = -761.38%
The Bottom Line
ATVI, SHOP, PYPL, GOOGL, & QFIN represent top growth stocks for July 2021. Given the strong historical revenue & earnings growth, and multiple big money buy signals, these stocks could be worth extra attention.
To learn more about MAPsignals’ Big Money process please visit.
Disclosure: the author holds long positions in PYPL & GOOGL in personal and managed accounts. He holds no positions in ATVI, SHOP, & QFIN at the time of publication.
A portfolio of outlier stocks can become chock full of monster gains for years to come, if chosen wisely.
But wouldn’t it be great if there was already a collection of outliers we could buy without even having to think about it?
Well maybe there is a way to do just that… through outlier ETFs.
So, here I’m going to give you the best ETFs that big money is getting involved in this month.
First thing’s first: to find them, I looked at all the ETFs making Big Money signals. I did that by heading over to MAPsignals.com and then looked at the Big Money ETF Buys and Sells chart. I looked at days with the biggest buying, circled here:
Once I had all the ETFs, I wanted to know which were the best potential opportunities. ETFs are baskets of stocks. And because MAPsignals scores over 6,000 stocks every day, as long as I know which stocks make up the ETFs, I can rank them all.
Here are the 5 best ETFs with scores: The Composite score, Technical score, and Fundamental score. These were computed by accounting for each components stock’s score and its associated weighting in the ETF. (keep in mind that weightings will change from time to time)
Below we see each ETF, their recent Big Money activity, and their scores. XLF, ITB, and XLC are top ranked ETFs. That makes sense because financials, home builders, and communications stocks have been leading the market much of this year so far.
IGV and ARKG, however, rank low on our list of ETFs. But there is opportunity here because the low scores are due to weak technicals. Big Money has been selling these ETFs, largely because they are heavily concentrated in growth stocks. But these stocks have excellent fundamentals: growing sales and earnings and big profits. These weak ETFs represent great potential bargains.
Let’s quickly look at the year-to-date performance of these 5 ETFs:
Now let’s quickly look at Big Money buying in the ETFs. Each chart below has many green bars which represents unusually large buying. The few red bars represent unusually large selling. What jumps out is the huge buying in all the ETFs.
Only with IGV and ARKG, there was recent selling too. But again, selling on ETFs and stocks with great fundamentals represents a value opportunity.
Here’s why I like these ETFs: they are highly concentrated with fundamentally superior stocks. Below we see a table of three stocks in each ETF. They are some of the highest weightings in each.
Notice their fundamental scores are very strong on a scale from 0-100. This means strong growing sales, earnings, and profits over one and three years. This is how MAPsignals boils down all its fundamental research into one elegant score.
Now with XLF, ITB, and XLC – we see the stocks also have strong technical scores. That means Big Money has been pouring into them, lifting them to new highs. They are buoyant with Big Money support. But in IGV and AKG, we see weak technical scores. This means Big Money has been exiting the stocks.
But before you get spooked, let’s keep the recent environment in mind: Growth has fallen out of favor while value and reopen stocks have become all the rage. But it’s essential to remember these growth companies create phenomenal products and services enhancing our lives. I don’t foresee that stopping in the future. The recent selling is temporary and thematic.
What really drives this home is looking at how long-term Big Money buying can lead to monstrous gains. Below are charts showing all the instances these stocks were Top stocks in our research since 2015: our weekly report of outliers. We don’t need to go into details on each chart.
I’d like you to notice a few things:
When Big Money buying pours in, stocks go up
Repeated outliers, especially for years often means outsized gains
Owning outlier stocks is the way I try to beat markets. Easy exposure to many stocks can be achieved by buying ETFs. But just like anything, you must be in the 1% if you want to be in the 1%.
We can find outlier ETFs by tracking the Big Money. But that alone isn’t enough: when we catalog the components and find outlier stocks underneath… that’s the winning recipe.
So, there you have it: the 5 best ETFs that Big Money has been trafficking in recently. Outlier ETFs hold outlier stocks. Finding them is the key to finding potentially outlier gains.
Now let’s look at what those look like:
The Bottom Line
XLF, ITB, XLC, IGV, & ARKG represent top ETFs for June 2021. Financials, homebuilders, & Communications stocks have performed well lately, which should continue. Software and Genomics companies have reached interesting levels, too. Paying attention to the fundamental quality of ETF constituents is paramount.
Disclosure: the author holds long positions GOOGL, CRM, & REGN in managed accounts, but no positions in XLF, ITB, XLC, IGV, ARKG, BLK, SCHW, SPGI, DHI, LEN, LOW, FB, ATVI, ADBE, MSFT, TDOC, & VRTX at the time of publication.
The Commerce Department last week reported that the U.S. economy grew at a +6.4% annual rate in the first quarter, slightly below estimates but still strong. If it would have come in real hot and much higher bears would have pointed to fanning the inflation flames even further.
This mindset of “bad-news-could-be-good-news” is helping to keep the stock market at or near all-time highs. If economic data somewhat disappoints it means the Fed stay dovish and accommodative for longer.
That might be important to keep in mind as April data starting this week is expected to be extremely good. The April Employment Report is due next Friday and with upper-end of Wall Street estimates look for upwards of +1 million new jobs being added. Other key April data next week includes the ISM Manufacturing Index on Monday, and the ISM Non-Manufacturing Index on Wednesday.
If the data comes in better than expected the bears will win the nearby battle and have the upper hand when talking higher inflation and the Fed perhaps tightening sooner than anticipated. So this week could be a bit tricky whereas “disappointing-data” could actually be digested as a win for the bulls and “strong data” a win for the bears.
Checking in on U.S. progress against Covid-19, the number of adults that have received at least one dose is around 60%-65%, depending on the source. Global cases continue to rise led by India, where new infections have been hitting new record highs every day for weeks now. The country reported a staggering 380k new infections and 3,645 new deaths on Thursday while less than 10% of the population has been vaccinated.
Bottom line, the global restart will not be synchronized like many bulls had hoped would be the case and global growth may continue to struggle. At the moment the U.S. market doesn’t seem to care. It will be interesting to see if increasing inflation and continued global headwinds will eventually come home to roost.
SP500 technical analysis
Earnings season can bring volatility to the stock market. At the beginning of May, cycles turn to the downside. Note, this is only a timing tool and it never shows the amplitude or strength of the move. When cycles are topping, it means we can expect a move down or choppy trading. This is it.
But relying on cycles only is not a good idea. Insider Accumulation Index shows bearish divergence on a daily chart. At the same time, Advanced Decline Line is still strong. The key resistance is around 4250 at the moment. I believe earning season can bring a profit booking to the stock market. If that happens, watch 4000 – 39500. It was a massive resistance and now it might turn into support. Intermarket Forecast is neutral. But if it turns to the downside, we will finally see a pullback in SP500.
Shares of Activision Blizzard are gaining about 10% in today’s trading session after the release of a strong Q4 earnings report.
Activision Blizzard reported revenue of $3.05 billion and GAAP earnings of $0.65 per share, beating analyst estimates on both earnings and revenue.
The company also increased its annual dividend from $0.41 per share to $0.47 per share. At the current stock price, Activision Blizzard yields 0.46%. It should be noted that game developers have never been considered as income stocks so Activision Blizzard’s dividend serves as an additional positive catalyst rather than a center of the bullish thesis.
Activision Blizzard has also announced a two-year stock repurchase program. The company can buy up to $4 billion of its common shares during this period, and the buyback program will likely provide additional support to the stock.
What’s Next For Activision Blizzard?
Activision Blizzard benefited from strong demand for its products during the pandemic. While the current virus containment measures are not as strict as the ones that were implemented in spring of 2020, demand for video games remains robust.
Call of Duty and World of Warcraft performed well in the fourth quarter of 2020, and the company believes that this momentum will be sustained in 2021. The company also noted that the first stage of regional testing for the mobile Diablo Immortal went well, and Blizzard planned further rounds of testing ahead of the launch planned for later this year.
Diablo is a very popular franchise, and the release of the mobile version will likely boost the company’s financial performance although Activision Blizzard did not include any material contribution from the title into its 2021 outlook.
Not surprisingly, analysts rushed to revise their forecasts after the release of Q4 results as solid financial performance, dividend hike and stock buyback are expected to serve as significant upside catalysts.
Video game stocks were big winners in the first half of 2020, benefiting from people looking to stay entertained while spending more time at home during the coronavirus pandemic. As infection numbers continue to rise in many parts of the world heading into winter, consumers will likely once again try their hand at gaming to ride out the holidays until COVID-19 vaccines arrive early next year.
“While we wait for a vaccine and eventual economic recovery to unfold, video games are an attractive place to be invested as they benefit from cyclical weakness and stay-at-home orders in the short term,” Deutsch Bank analyst Bryan Kraft told clients, per Business Insider.
Below, we take a look at three video game stocks and turn to technical analysis to identify possible trading opportunities.
Electronic Arts Inc.
With a market capitalization of $37.92 billion, Electronic Arts Inc. (EA) markets, publishes and distributes video games, content, and services for game consoles, PCs, mobile phones, and tablets. Some of the video game publisher’s well-known franchises include “Madden,” “FIFA,” “Battlefield,” “Apex Legends,” “Mass Effect,” “Dragon’s Age,” and “Need for Speed.” Over the holidays, the company plans to release highly-anticipated titles “Medal of Honor: Above & Beyond” and “Mass Effect Legendary Edition.”
Management said it expects third-quarter bookings of $2.35 billion while seeing full-year bookings reach $5.95 billion. From a charting perspective, the share price broke above a descending channel earlier this month. This may give rise to a retest of the 52-week high at $147.36.
Activision Blizzard, Inc.
Activision Blizzard, Inc. (ATVI) develops and distributes content and services on video game consoles, PCs, and mobile devices. The $63.58 billion video game maker owns an impressive franchise portfolio that houses “Call of Duty,” “World of Warcraft,” “Diablo,” “Hearthstone,” “Overwatch,” and “Candy Crush.” Upcoming games in the pipeline include “Overwatch 2” and “Diablo IV.”
The company forecasts full-year revenue of $7.7 billion and earnings of $2.61 per share. Meanwhile, analysts expect sales of $7.8 billion and earnings of $2.59 a share. ATVI shares have also broken out above a descending channel this month that places the bulls firmly in control. Look for upside momentum to push the price back toward its all-time high at $87.73.
Take-Two Interactive Software, Inc.
Take-Two Interactive Software, Inc. (TTWO) develops, publishes, and markets interactive entertainment solutions. The New York-based video game publisher behind franchise hits “Grand Theft Auto” and “NBA 2K” reported fiscal second-quarter net income of $99.3 million, or 86 cents per share. This compares to a net profit of $71.8 million, or 63 cents a share in the year-ago quarter.
Looking ahead, the company said it plans to release 93 games over the next five years, with 47 of those coming from existing franchises. Turning to the charts, the share price has consolidated near the August high over the past week, indicating the stock may continue trending upwards during the coming months.
Activision-Blizzard Inc. (ATVI) beat Q2 2020 earnings estimates by a country mile in an early August release, lifting the stock to an all-time high. The game maker booked a profit of $0.75 per-share while revenue rose an impressive 72.3% year-over year to $2.08 billion, much higher than $1.35 billion expectations. Sharply raised Q3 and fiscal year guidance also got bulls’ undivided attention, completing a blowout report that triggered a vertical breakout after a brief decline.
Activision-Blizzard Pandemic Beneficiary
The installed player base has grown 30% year-over-year so far in 2020 while individual play times have risen a phenomenal 70%, all as a result of pandemic shutdowns and virtual working spaces. Hit content titles that include Call of Duty are also driving growth, with that game’s play time rising eightfold this year. These tailwinds are likely to continue, with the N.Y. Times just releasing a survey that expects only 54% of workers to return to New York offices by July 2021.
Needham analyst Laura Martin pounded the tables on Wednesday, stating, “We believe that lock-downs have accelerated several media trends and Activision-Blizzard is among the biggest beneficiaries. We raise our ATVI estimates for FY20 and FY21 and discuss recent trends in viewing and play times across the video game industry that benefits the stock. We are most excited about ATVI’s leadership position in eSports and we remain optimistic about eSports betting as a long-term revenue driver. We reiterate our Buy rating and $102 PT.”
Wall Street And Technical Outlook
Wall Street has been steadfastly bullish about Activision-Blizzard’s long-term outlook, with a ‘Strong Buy’ rating based upon 22 ‘Buy’ and just 1 ‘Hold’ recommendation. A single analyst is recommending that shareholders sell their positions at this time. Price targets currently range from a low of $65 to a street-high $106 while the stock is now trading $15 below the median $94, perfectly placed for higher prices.
However, Activision-Blizzard isn’t well-positioned to be bought right now because it just failed the breakout above the 2018 high in the mid-80s. Selling pressure is picking up, targeting the 200-day EMA near 70. That level could offer a low risk buying opportunity, for three reasons. First, the stock will no longer be technically overbought. Second, the company should post strong quarterly results well into 2021. Third and most importantly, next-generation video game consoles set for release in coming months should add another significant tailwind.
Activision Blizzard Inc. (ATVI) sold off after blowing away top and bottom line Q2 2020 estimates last week, but recovered quickly, posting an all-time high at 87.73 in the following session. The video game manufacturer booked a profit of $0.75 per-share while revenue grew an astounding 72.3% year-over-year to $2.08 billion. The company issued upside guidance for fiscal year 2020, raising estimates to $2.46 per-share on $7.625 billion in revenue.
Activision Blizzard Benefiting From COVID-19 Pandemic
Strong 2020 tailwinds predict even higher stock prices in coming months. For starters, COVID-19 shutdowns across the globe have encouraged many gamers to buy new consoles and titles, even though the next generation of Xbox and PlayStation devices is scheduled for release in the fourth quarter. Those releases mark a second notable tailwind, focusing attention on the video gaming industry after several years of mixed results.
Needham analyst Laura Martin raised their Activision Blizzard target to $90 in July, noting the following supportive factors: a) live sports and films/cinemas being dark, b) COVID-19 lock downs generating higher in-game revenue, c) eSports as a key upside driver while ATVI just launched its second pro league, d) cultural bias against video games is ebbing as parents now understand the highly social aspect e) social distancing is valuable during COVID-19.
Wall Street And Technical Outlook
Wall Street consensus on Activision Blizzard is highly bullish, with a ‘Strong Buy’ rating, based upon 21 ‘Buy”, 2 ‘Hold’ and 1 ‘Sell’ recommendation. Price targets currently range from a low of $65 to a street-high $106 while the stock opened Tuesday’s U.S. session $11 below the median $92 target. This placement should support even higher prices but overbought technical readings could delay further upside until Q3 performance trends become more transparent.
The stock sold off from 85 to 40 between December 2018 and February 2019 and spent the next 18 months completing the 45-point round trip into the prior high. A minor breakout to new highs is now fading quickly, with selling pressure reinforcing resistance in the mid-80s. Even so, accumulation readings have already broken out to all-time highs, predicting that price will soon follow, potentially supporting a rapid advance into triple digits.
General Motors is set to provide its earnings report today before the market open. Analysts expect that the company will report revenue of $31.37 billion and profit of $0.34 per share.
The main intrigue is how the company plans to deal with the current crisis. The coronavirus containment measures dealt a heavy blow to the auto industry, and it’s not surprising that General Motors shares lost more than 40% of their value since the beginning of this year.
Recent reports suggest that General Motors wants to raise an additional $2 billion via a loan to boost its liquidity, but this has not yet been confirmed by the company. In all likelihood, General Motors will provide an update on liquidity measures during the upcoming earnings call.
The sales guidance is also of outmost importance as traders and investors try to guesstimate how much actual damage was done during the recent months and whether the company can mitigate this damage via increased sales after the end of virus containment measures.
Shopify is one of the stocks that rallied due to the pandemic as consumers switched to online shopping options as brick-and-mortar stores were unavailable.
The company will provide its quarterly report today before the market open. The analyst consensus calls for revenue of $443 million and loss of $0.17 per share.
In all likelihood, the market will ignore the profitability metric and focus on the top line growth. However, the expectations are high as Shopify shares are up more than 70% year-to-date and have reached their all-time highs during the most recent trading session.
In case Shopify results fail to meet expectations, I’d expect a rapid sell-off as the stock’s valuation implies flawless execution.
Activision Blizzard provided its quarterly results yesterday after the market close. The company reported revenue of $1.79 billion and profit of $0.65 per share, beating analyst estimates.
Activision Blizzard benefited from stay-at-home orders and success of the new Call of Duty which was released in March. As the lockdowns continued in April, the positive business environment remained intact.
The company expects that the strong momentum will continue and raises the outlook for revenue and earnings per share for the full year.
Before the earnings report, Activision Blizzard shares were up about 15% year-to-date. The market has positively reacted to the news, and the stock gained ground during the after-hours trading session. This trend may continue in the regular trading session.
Revenues of Activision Blizzard increased by close to 14% year-over-year to reach a figure of $1.97 billion. Profits for the quarter amounted to $500 million which translated to $0.65 per share. This was an increase from $426 million or $0.56 per share which was recorded in last year’s first quarter.
With these results, Activision Blizzard also managed to beat the forecasts the firm had for the quarter with revenue being greater by a figure of $145 million while profit exceeded forecasts by $0.18 per share. The gaming publisher also slightly raised the full-year outlook with revenue expected to reach $7.36 billion while profit will rise to $1.79 per share.
Monthly active players
During the quarter the number of monthly active players for the Activision brand hit a figure of 51 million. The most popular title which was credited with being the driving force was Call of Duty and particularly Call of Duty: World War II. With regard to revenues, this was the second-best first quarter that Call of Duty has ever had and was only eclipsed by the first quarter of 2016 after the launch of Black Ops III.
Despite the impressive results, Activision Blizzard has revealed that sales were being impacted by Fortnite, a shooting game which has taken over the gaming world across the globe. In a little over half a year, the Fortnite title has become a force to reckon with as it has caught the attention of millions of players across the world especially school children. In Fortnite players numbering up to 100 hang-glide to an island where they build defenses and battle it out till only one of them is left alive.
The game is available on gaming consoles, personal computers, and mobile devices. Though Fortnite is freely downloadable as well as being free to play the game which is backed by Epic Games is making money by selling in-game purchases and this includes accessories and outfits for the characters. Since it hit a peak of $77.82 earlier in the year shares of Activision Blizzard have fallen by around 15% over concerns that its popular franchises would be abandoned in favor of Fortnite. During an earnings call with analysts the chief executive officer of Activision Blizzard, Bobby Kotick acknowledged that Fortnite posed a competitive threat.
“[Fortnite] is attracting new players of all ages and gender, and it is helping gaming become even more mainstream entertainment. In the long history of our company … we are very quick to figure out how to capture inspirations from innovation,” said Kotick.
Prior to the release of the earnings there had been an error when Dow Jones Newswires inadvertently published wrong figures for Activision Blizzard for the quarter. This resulted in volatility though Dow Jones issued a correction after realizing the error.