Is ATVI a buy ahead of earnings?

A big name within the so-called “stay at home” stocks is reporting tomorrow and its time for the breakdown. Here is the breakdown on $ATVI otherwise known as Activision Blizzard.


Current Price: $87.25

52/Wk High: $85.05 (AFTER HOURS NEW HIGH AT $87.25)

52/Wk Low: $44.91


Read below for the breakdown!


The video game sector of the stock market has been booming, and at the end of the day, rightly so. COVID-19 has caused many to be forced inside and a hugely popular stay at home activity is video games.


Activision Blizzard is a video game developer and publisher who has created and maintains some of the largest franchises in the industry such as Call Of Duty.


$ATVI is not the largest in the market but has had solid growth through COVID-19 to fuel its fire. The company averages 407 million monthly users as of the first quarter and with the current standings of COVID-19 I see no reason for that to decrease.


Furthermore, Activision Blizard has several positive catalysts upcoming. First off, new consols from $MSFT and Sony will be releasing this year. As many know, every year new major gaming consoles come out, the video game stocks tend to do great.


Secondly, the company is within a growing sector. Currently, the industry is expected to grow 14.9% through to 2023 (investorplace.com).


Finally, $ATVI has placed itself well within the eSports community. The company owns 30% of the top 10 major games used in present and upcoming eSport matches (investorplace.com).


Getting into the numbers Activision Blizard reported a strong first quarter. The company delivered a beat with a $0.58 EPS versus the expected $0.38 EPS consensus.


Secondly, revenue came in strong through the first quarter, with $1.5 billion in revenue during the first quarter.


Unfortunately, the numbers did have some slim negatives. Such as the long time debt the company has held, which is currently at $2.675 billion.


On the bright side, the expectations are looking great. Analysts expect $ATVI to report an EPS of $0.69 and revenue of $1.7 billion.


Given that $TTWO just reported a beat tonight for their Q2 report, I expect that $ATVI can beat on earnings.


Analysts are somewhat undecided on $ATVI and earnings tomorrow will determine the stock’s directional future. Currently, the average price target is $83.76/share representing a -1.21% downside.


On the bright side, the high price target is $92.00/share representing 8.50% of the upside and the low price target is $65.00/share.


If Activision comes through with strong Q2 earnings and guidance I think analysts will be forced to upgrade price targets, therefore pushing the stock.


The big money is also extremely bullish on $ATVI. Currently, 90.15% of $ATVI is owned by institutions. Top holders include Black Rock, Capital International Investors, and Capital World Investors.


Overall I very much like Activision Blizzard and the stock. While it has run some and stands at highs, past market trends show if a beat comes through, the stock can run even further.


While I do not hold a position I am considering one. Buying at these levels is understandable, but I would follow it with a close stop. At the end of the day this market is extremely bullish and $ATVI is a great company for the times.


EAT - SLEEP - PROFIT


Disclaimer: This is not direct financial advice, simply opinion based on independent research.