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Today we're going to take a look at the well-established Activision Blizzard, Inc. (NASDAQ:ATVI). The company's stock saw significant share price movement during recent months on the NASDAQGS, rising to highs of $49.55 and falling to the lows of $41.42. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Activision Blizzard's current trading price of $45.09 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Activision Blizzard’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Activision Blizzard?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 3.4% below my intrinsic value, which means if you buy Activision Blizzard today, you’d be paying a fair price for it. And if you believe the company’s true value is $46.66, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, Activision Blizzard’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of Activision Blizzard look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -14% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Activision Blizzard. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? ATVI seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on ATVI for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on ATVI should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Activision Blizzard. You can find everything you need to know about Activision Blizzard in the latest infographic research report. If you are no longer interested in Activision Blizzard, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.