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Activision Blizzard (ATVI) Stock Sinks As Market Gains: What You Should Know

Zacks Equity Research
Adobe Systems (ADBE) closed the most recent trading day at $275.45, moving -1.57% from the previous trading session.

Activision Blizzard (ATVI) closed the most recent trading day at $46.44, moving -1.15% from the previous trading session. This change lagged the S&P 500's daily gain of 0.72%. Meanwhile, the Dow gained 0.55%, and the Nasdaq, a tech-heavy index, added 0.71%.

Heading into today, shares of the maker of "Call of Duty" and other video games had gained 11.96% over the past month, outpacing the Consumer Discretionary sector's loss of 2.01% and the S&P 500's gain of 0.28% in that time.

ATVI will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $0.26, down 31.58% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $1.24 billion, down 10.39% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $2.23 per share and revenue of $6.49 billion. These totals would mark changes of -14.23% and -10.64%, respectively, from last year.

Any recent changes to analyst estimates for ATVI should also be noted by investors. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. ATVI is currently sporting a Zacks Rank of #3 (Hold).

Investors should also note ATVI's current valuation metrics, including its Forward P/E ratio of 21.08. This represents a premium compared to its industry's average Forward P/E of 20.48.

Also, we should mention that ATVI has a PEG ratio of 2.08. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Toys - Games - Hobbies was holding an average PEG ratio of 1.66 at yesterday's closing price.

The Toys - Games - Hobbies industry is part of the Consumer Discretionary sector. This industry currently has a Zacks Industry Rank of 77, which puts it in the top 31% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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