Shares of Activision Blizzard (NASDAQ:ATVI) have been slowly but surely making a comeback. Activision Blizzard stock is up 20% so far in 2019, thanks in large part to the near-24% rally it’s experienced over the past month.
That said, the stock is still well off its highs. For instance, ATVI stock is still down 30% over the past 12 months. Is now the time to buy Activision stock, while it’s regaining some bullish momentum but it’s still well below its former highs?
According to several analysts, the answer may be yes. But no one is expecting ATVI to return to its 52-week high near $85, at least not yet.
Why Activision Blizzard Stock Can Reach $65
September has been a busy month for the analysts who cover ATVI. On Sept. 4, BMO Capital Markets gave the shares a buy-equivalent rating and assigned a $60 price target to ATVI stock.
Since then, ATVI stock has received three more buy-equivalent ratings, all with $65 price targets. From current levels, that implies about a 16% gain by Activision Blizzard stock. While $65 is still a long way from the all-time high, a 16% rally is nothing to scoff at.
Stifel, which issued one of the three recent bullish calls on Activision Blizzard stock, cited improving fundamentals in 2020 and easy comparisons next year. The company’s upcoming BlizzCon event and the launch of its new Call of Duty game this fall could also be positive catalysts for ATVI stock. The firm added Activision Blizzard stock to its Select list.
Also upgrading ATVI this month was Nomura, which assigned a “buy” rating and a $64 price target. The firm argued that Activision’s recently launched World of Warcraft Classic game has “strong, above-average engagement” metrics. And like Stifel, Nomura believes the BlizzCon event can be a positive catalyst for ATVI stock.
Valuing ATVI Stock
ATVI has definitely had a tough 2019, and Activision Blizzard stock has paid the price. Analysts’ average estimate calls for the company’s revenue to sink 12.7% this year and for its earnings to drop nearly 16%. Ouch.
But now Activision Blizzard stock is starting to gain some momentum among both investors and analysts
That’s partly because we’re coming into a seasonally strong time of the year. Video-game companies benefit from the holiday blitz, particularly when the economy is doing well.
It also helps that there’s only a few months left in 2019. As Stifel noted, the easier year-over-year comparisons in 2020 should help spark more optimism towards Activision Blizzard stock.
For 2020, average estimates call for a roughly 10% rebound in sales and a 15.5% recovery in earnings. Analysts, on average, still expect the company’s 2020 results to come in below its 2018 numbers, but a rebound is at least a step in the right direction. If ATVI builds on the momentum it’s expected to have in 2020, Activision Blizzard stock could reach new highs.
Trading Activision Stock
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Activision Blizzard stock has easily outperformed its closest peers over the past month, as it’s jumped almost 24% during that time. That compares to the roughly 6% rally by Electronic Arts (NASDAQ:EA) and the approximately 2% decline by Take-Two Interactive (NASDAQ:TTWO) over the same period.
However, going back further, the story has been different. For instance, all three names are up similar amounts so far in 2019. ATVI is up 20%, while EA and TTWO are up 26% and 25%, respectively. Over the past year though, ATVI’s 30% decline is far worse than the 12% decline by EA and the 3% fall by TTWO.
Activision Blizzard stock made an important move last month, pushing through $50 and rising into the mid-$50s. It’s now consolidating between $55 and $57, as bulls try to work up the energy to push the shares even higher.
Can they do it?
Near $57 — the top of the recent consolidation zone — is the 61.8% retracement of the one-year range. If Activision Blizzard stock is able to push through that level, the 50% retracement at $62.26 is the next upward target. By reaching that level, ATVI stock would also fill the gap from all the way back in November.
If ATVI stock can push through that zone, then the recently popular price target of $65 will be on the table.
If the 61.8% retracement level act becomes resistance to Activision Blizzard stock, ATVI could drop. If that happens, look to see if the 20-day moving average can lift the name. Bulls desperately want to see ATVI stock stay above the $50 mark now, though.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.
