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Alan Farley
ATVI

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.

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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.

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