Today we're going to take a look at the well-established Activision Blizzard, Inc. (NASDAQ:ATVI). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Activision Blizzard’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Activision Blizzard worth?
Activision Blizzard appears to be overvalued by 21% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$54.48 on the market compared to my intrinsic value of $45.14. This means that the opportunity to buy Activision Blizzard at a good price has disappeared! Furthermore, Activision Blizzard’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from Activision Blizzard?
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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Activision Blizzard, it is expected to deliver a relatively unexciting earnings growth of 0.4%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? ATVI’s future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe ATVI should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on ATVI for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
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.
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.
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. Thank you for reading.