Activision-Blizzard Selloff Could Offer Buying Opportunity

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.