Much like the hero of a classic video game, Activision Blizzard (NASDAQ:ATVI) has undergone an epic journey, struggled mightily, and ultimately appears to be staging a comeback from the depths of despair or at least that’s what longtime investors in Activision stock are hoping for.
Truth be told, you don’t have to be a gamer yourself to partake of the profits in Activision Blizzard stock; it’s a solid company on the rebound with a well-known video-game franchise reboot and an analyst upgrade in its favor.
Mapping out a Comeback for Activision Stock
Adventure gamers understand the importance of mapping out a plan of attack, and for Activision Blizzard stock investors, that means checking the long-term price action of the shares. Amazingly, the ATVI stock price has steadily climbed from around $11 in 2012 to a peak price of $84.68 a year ago – only to deflate to the $40 level in February.
Yet, in what could turn out to be a historic turnaround story in the annals of the gaming market, ATVI has retraced back up to the mid-fifties and investors are starting to lean bullish once again on this decades-old company. That’s exactly the kind of game I like to play as a value investor, and with a P/E ratio at around 25, the Activision Blizzard stock price remains competitive among its peers.
I’m not the only one in the bull camp on ATVI stock, it seems, as BMO Capital Markets analyst Gerrick Johnson has recently awarded Activision Blizzard stock a major upgrade. More specifically, Johnson moved ATVI up a notch from to market perform to outperform while raising his price objective from $43 to $60 – a sizable improvement in outlook, to say the least.
Bringing Back the Classics
If you’re wondering why BMO so sharply increased their price target, Johnson has provided a succinct but convincing rationale:
We are increasing our 2020 earnings-per-share estimate to $3 from $2.50, based on a higher conviction level that investments in core games like Call of Duty and World of Warcraft will generate an improvement in performance.
As heartened as I am by the prospect of a major EPS boost, it’s the familiar game names that encourage me the most. Long-standing franchises like Call of Duty and World of Warcraft resonate deeply with gaming addicts from all walks of life, and their resurrection is precisely what Activision Blizzard needs now to take the Activision stock price back to all-time highs.
Indeed, the Aug. 26 launch of World of Warcraft: Classic proved to be a milestone, not just for the company but for the gaming market as a whole: Amazon (NASDAQ:AMZN) game-streaming platform Twitch was practically smoking with overworked servers as 6.1 million WoW (as it’s commonly abbreviated) fans tuned in for the premiere.
At the event’s pinnacle, 1.1 million visitors viewed this event simultaneously. This may be a baffling number to you non-gamers out there, but WoW fans will completely understand.
In any case, Activision Blizzard’s comeback isn’t structured solely around one game, as the company will also focus its efforts on other popular names like Call of Duty and Overwatch as well as more niche-specific fare like Hearthstone and Diablo. With all of that, 2019 could be a transition – and renewed hope – for the company and shareholders as Activision Blizzard endeavors to restructure its business model, bolster its subscriber count, and create enhanced shareholder value going forward.
The Takeaway for Activision Stock
Games like Call of Duty and World of Warcraft aren’t for everybody, and the same could be said of Activision stock, which is as niche as the company it represents. Nonetheless, it can’t be denied that Activision Blizzard’s return to the great games of the past is more than just a nostalgia rush, it’s a rejuvenating force for a company that, if I may say so, knows how to play the game.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
