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What to Make of Activision Blizzard’s Recent Dips

I'm bullish Activision Blizzard (NASDAQ:ATVI). The stock has sunk 17% over the past three months, and getting in on beaten-down stocks is an excellent swing-trading...
What to Make of Activision Blizzard’s Recent Dips © Reuters. What to Make of Activision Blizzard’s Recent Dips

I'm bullish Activision Blizzard (NASDAQ:ATVI). The stock has sunk 17% over the past three months, and getting in on beaten-down stocks is an excellent swing-trading strategy.

Activision Blizzard is a leading American gaming company. The gaming industry is expected to grow at a CAGR of 9.64% through 2026, to $314.40 billion.

ATVI is currently trading at 23% below its 52-week high of $104.53, suggesting that this could be a good window to take a closer look at the stock. (See Activision stock charts on TipRanks).

ATVI Is Undervalued

Value investors should appreciate it that the forward P/E valuation of ATVI is only 18.2x. This is lower than Take-Two Interactive’s (NASDAQ:TTWO) 23.2x, and Electronic Arts’ (EA) 19.7. Value investors can exploit this asymmetrical bias against Activision.

Don’t Worry about China

People overreacted to China’s restriction on video game playtime for minors. Investors forgot that the Asia-Pacific contributed only $972 million to ATVI’s 2020 revenue of $8.1 billion.

ATVI’s Stochastic Oscillator score of 29.87 is getting closer and closer to the Stochastic Oversold territory score of 20 and below, suggesting that perhaps investors are being overly cautious.

Activision Remains a Growth Stock

Growth potential is the No. 1 factor when evaluating stocks. Based on the chart below, ATVI deserves more love from investors. Its forward EBITDA is 25.88%, while its forward revenue CAGR is 15.44%. Any company that has these growth metrics can be categorized as a high-growth investment.

(Source: Motek Moyen)

Investors should be more bullish on ATVI. Its King Digital mobile games subsidiary touts increasing quarter-over-quarter revenue. For Q2 2021, King Digital’s free-to-play games generated revenue of $635 million. This is notably higher than Q2 2019’s $533 million.

King’s mobile games contributed almost one-third of Activision Blizzard’s recently quarterly revenue of $1.93 billion. Mobile gaming is the growth driver of the video games industry.

Activision Blizzard touts a net operating cash flow of $2.57 billion. This amount could cover interest payments on ATVI’s total debt of $3.6 billion. ATVI’s total cash position of $9.63 billion could also let it make acquisitions.

Wall Street’s Take

Wall Street analysts consider Activision a Strong Buy, based on 15 Buys and two Holds. The average ATVI price target is $114.25, implying 42.8% upside potential.

Conclusion

Activision Blizzard has better growth and profitability stats than Take-Two Interactive and Electronic Arts (NASDAQ:EA), its main rivals.

The company's undervaluation relative to its peers makes it an attractive long-term investment, if you want to invest in the growing gaming industry.

Disclosure: At the time of publication, Motek Moyen did not have a position in any of the securities mentioned in this article.

​Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

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28-09-2021 20:47:55 (UTC+7)

EUR/USD

1.1674

-0.0020 (-0.17%)

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Moving Avg:

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Indicators:

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EUR/USD

1.1674

-0.0020 (-0.17%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (9)

GBP/USD

1.3536

-0.0159 (-1.16%)

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USD/JPY

111.61

+0.61 (+0.55%)

Summary

↑ Buy

Moving Avg:

Buy (12)

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Buy (8)

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AUD/USD

0.7240

-0.0046 (-0.64%)

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↑ Sell

Moving Avg:

Buy (1)

Sell (11)

Indicators:

Buy (0)

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USD/CAD

1.2676

+0.0049 (+0.39%)

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↑ Buy

Moving Avg:

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EUR/JPY

130.29

+0.51 (+0.39%)

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↑ Buy

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Buy (8)

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EUR/CHF

1.0856

+0.0033 (+0.30%)

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Gold Futures

1,732.00

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4.2675

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Moving Avg:

Buy (3)

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Crude Oil WTI Futures

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Brent Oil Futures

79.31

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US Coffee C Futures

196.83

+3.18 (+1.64%)

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Buy

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Buy (8)

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Buy (5)

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Euro Stoxx 50

4,087.05

-78.43 (-1.88%)

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Sell (7)

S&P 500

4,396.10

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DAX

15,343.45

-230.43 (-1.48%)

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FTSE 100

7,047.31

-16.09 (-0.23%)

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Sell (6)

Hang Seng

24,500.39

+291.61 (+1.20%)

Summary

↑ Buy

Moving Avg:

Buy (9)

Sell (3)

Indicators:

Buy (7)

Sell (1)

US Small Cap 2000

2,262.85

-18.94 (-0.83%)

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↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (1)

Sell (6)

IBEX 35

8,856.50

-146.40 (-1.63%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

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Sell (8)

BASF SE NA O.N.

65.040

+0.300 (+0.46%)

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↑ Buy

Moving Avg:

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Bayer AG NA

47.49

+0.02 (+0.04%)

Summary

Neutral

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Allianz SE VNA O.N.

195.22

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Summary

Neutral

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Adidas AG

270.06

-8.74 (-3.13%)

Summary

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Buy (10)

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Deutsche Lufthansa AG

6.490

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Siemens AG Class N

143.23

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11.112

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Summary

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Moving Avg:

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Buy (9)

Sell (0)

 EUR/USD1.1674↑ Sell
 GBP/USD1.3536↑ Sell
 USD/JPY111.61↑ Buy
 AUD/USD0.7240↑ Sell
 USD/CAD1.2676↑ Buy
 EUR/JPY130.29↑ Buy
 EUR/CHF1.0856↑ Buy
 Gold1,732.00↑ Sell
 Silver22.323↑ Sell
 Copper4.2675↑ Sell
 Crude Oil WTI76.06Sell
 Brent Oil79.31↑ Sell
 Natural Gas6.076↑ Buy
 US Coffee C196.83Buy
 Euro Stoxx 504,087.05↑ Sell
 S&P 5004,396.10↑ Sell
 DAX15,343.45↑ Sell
 FTSE 1007,047.31↑ Sell
 Hang Seng24,500.39↑ Buy
 Small Cap 20002,262.85↑ Sell
 IBEX 358,856.50↑ Sell
 BASF65.040↑ Buy
 Bayer47.49Neutral
 Allianz195.22Neutral
 Adidas270.06↑ Buy
 Lufthansa6.490↑ Buy
 Siemens AG143.23↑ Sell
 Deutsche Bank AG11.112↑ Buy
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