My thesis on video game publisher Activision (NASDAQ:ATVI) stock has been quite simple for a long time. Activision stock has huge multi-year growth potential through next-gen gaming innovations, cloud gaming, and eSports.

But those catalysts aren’t emerging just yet, and the valuation has been pretty stretched for most of 2018. Thus, the best approach was wait and see. Wait for those catalysts to arrive. See how the stock reacts. Then, buy the breakout if it happens.

I think that breakout may finally be happening.

For most of 2018, Activision stock has been range-bound, bouncing between the mid-$60’s and the mid-$70’s. But, the stock is breaking out now to new all-time highs after the company added eight new franchises to Overwatch League and launched Call of Duty: Black Ops 4 beta to massively positive early reception.

In the big picture, it looks like the long-term eSports catalyst is finally starting to emerge and go global. Meanwhile, Activision also looks positioned to have a huge holiday season as strong Call of Duty demand will converge on robust consumer strength and confidence.

All together, it looks like the current breakout in Activision stock is the start of something big. This rally should persist, and Activision stock should finish the year with a bang.

The eSports Catalyst Is Going Global

Perhaps the most positive development for Activision stock over the past several days is evidence that the eSports catalyst is only growing in magnitude and, important, going global.

Over the past month, Activision has brought on board eight new franchises to its Overwatch League. That means that OWL, which had just 12 teams last year, is slated to have at least 20 teams next season. That is huge expansion, and means that OWL is starting to get to NFL, NBA, and MLB size (each league has roughly 30 teams).

Moreover, nine of OWL’s 20 franchises are outside of the United States. That includes big new expansion teams in China, Paris, and Canada. In other words, the OWL franchise is growing globally, and that means that the eSports catalyst is going global.

This “going global” dynamic speaks to the huge potential of eSports. Unlike traditional professional sports leagues, eSports is truly border-less. Because all the competition is digital, you don’t need to be in the same physical location to connect, watch, and/or compete.

Consequently, gamers in China can easily play gamers in Paris, and viewers in China, Paris, and everywhere else can easily enjoy watching the match.

From this perspective, eSports is much more globally scalable than traditional sports leagues. If demand is there, then, eSports could truly become something much larger than traditional pro sports leagues. Eight new expansions in OWL supports the thesis that global demand is there, and thus further supports the long-term bull thesis surrounding eSports.

Call of Duty Is a Huge Catalyst

Another positive development for Activision stock over the past several days is that the company’s new headline title, Call of Duty: Black Ops 4, has apparently launched to massively positive early reception.

The beta for the Blackout Battle Royale mode in the new Call of Duty game launched recently. According to Benchmark, that launch was met with hugely positive feedback, with many labeling the game as a “Fortnite killer.”

That is great news. The huge success of Fortnite illustrated that battle royale is the new mega-trend in the video game industry. The new Call of Duty game is seen as challenging Fornite for battle royale dominance, meaning that Activision is now a leader in the red-hot battle royale category.

This couldn’t come at a more perfect time for Activision. We are now just over three months away from the holiday season. Consumer confidence is sky-high. Retail sales are surging. The economy is healthy. In other words, the economic backdrop is favorable for consumers to open their wallets this holiday season.

It increasingly looks like one of the biggest holiday releases will be Call of Duty: Black Ops 4, and if so, Activision could sell a ton of video games over the next several months.

Technicals Look Good

Activision stock is breaking out. But, because the stock has been range-bound for so long, it is only 15% above its 200-day moving average.

Historically speaking, that isn’t that high. Earlier this year, the stock traded 20% above its 200-day moving average. Back in 2017, the stock was as much as 35% above its 200-day moving average at one point. And, in 2015, Activision stock traded as much as 40% above its 200-day.

In a historical context, the current breakout in Activision stock isn’t all that big. But, the fundamentals are strong, and only strengthening. Thus, this breakout could last for a lot longer, and carry the stock price much higher. That is exactly what I expect to happen into the end of the year, and realistically see the stock hitting $90 and up by the end of 2018.

Bottom Line on Activision Stock

A big valuation and the lack of an immediate catalyst have kept this stock stuck in neutral in 2018. But, that is about to change. Sideways trading has allowed the fundamentals to catch up to the valuation, and there are some big catalysts on the horizon with international eSports expansion and robust Call of Duty demand.

As such, this stock could be setting up for a major breakout, the likes of which should power the stock to new highs by the end of 2018.

As of this writing, Luke Lango was long ATVI.