Time to Buy Activision Blizzard Stock

Videogame maker and interactive entertainment content producer Activision Blizzard NASDAQ: ATVI stock is trading at the low end of a 10-point consolidation range. The pandemic was a powerful tailwind as stay-at-home mandates caused a surge in gaming. Investors are nervous about the reversion effect of the reopening. Back to school and work means less time for gaming. However, the new normal appears to continue to be fruitful for gaming companies as mobile, next-gen console players, and eSports continue to expand. This was evidenced in its Q1 2021 earnings report indicating the highest monthly active users (MAUs) in the Company’s history despite any new game releases. The Company has a pipeline of the richest legacy brands and new titles ready to roll out in upcoming quarters which should continue to accelerate growth. While the guidance reversion may have caused a dampening response, Activision may be setting the bar low with strong momentum heading into the latter part of the year. Prudent investors can watch for opportunistic pullbacks to scale into a position.

Q1 FY 2021 Earnings Release

On May 4, 2021, Activision released its fiscal first-quarter 2021 results for the quarter ending March 2021. The Company reported earnings-per-share (EPS) profits of $0.79 beating analyst estimates for $0.65, by $0.14. Revenues rose 36% year-over-year (YoY) to $2.07 billion beating $1.77 billion consensus analyst estimates. The Company had 435 million MAUs for the quarter, the highest in history. Legacy brands including Call of Duty, World of Warcraft, and Candy Crush performed strong. The Activision segment grew 72% YoY driven by Call of Duty: Black Ops Cold War and Warzone. The free-to-play and mobile experiences lead to a new record of 150 MAUs in Q1 and Call of Duty franchise MAUs grew 40% YoY. The April season is the top-grossing to date. Blizzard grew 7% YoY led by World of Warcraft’s Shadowlands expansion. Blizzard had 27 million MAUs in Q1. King mobile segment saw 22% YoY growth driven by strong Candy Crush growth with 258 million MAUs in Q1. King also grew 70$ YoY in advertising net bookings in Q1.

Mixed Guidance Raise

Activision raises Q2 2021 EPS to $0.81 versus $0.71 consensus analyst estimates on revenues of $1.85 billion matching estimates. The Company see full-year 2021 EPS of $2.91 (up from $2.83) versus $3.04 consensus analyst estimates. Activision lowered its full-year 2021 revenues to come in around $8.37 billion, down from the $8.45 billion original estimate and $8.57 billion consensus analyst estimates.

Conference Call Takeaways

Activision Blizzard CEO Bobby Kotick set the tone, “For more than a year now amid very challenging conditions the team at Activision Blizzard have played an important role in supporting and serving our community of 400 million players in 190 countries… With momentum continuing across our business, we’re raising our financial outlook for the year.” He went on to remind investors that $1,000 invested in Activision stock in 2001 would be worth $45,000 today compared to $4,900 in the S&P 500. He extolled the strategy, “Our strategy centers around our long-held view that wholly-owned entertainment franchises offer the opportunity for limitless innovation. We continue to increase investment in creative and commercial resources for our franchises and potential new franchisees to deliver a new compelling experience for players and superior financial returns for our shareholders.” The Call of Duty template is being applied to their portfolio of franchises as they seek to grow its audience to billions of players. The Company plans to increase hiring by 2,000 developers since 2020. The guidance EPS raise and then drop for full-year guidance given the impression that numbers were front-loaded, or the bar is purposely being set low to hop over.   

ATVI Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the playing field for ATVI shares. The weekly rifle chart was in the midst of a pup breakout before it suddenly collapsed off the $99.58 Fibonacci (fib) level to the $91.18 fib. The weekly rifle chart has a flat to falling 5-period moving average (MA) at $95.20 with the 15-period MA flat at the $94.22 fib. The weekly stochastic is now flat and potential crossing back down instead of forming a mini pup. The weekly upper and lower Bollinger Bands (BBs) at $103.56 and $88.27, respectively, are starting to contract. The daily rifle chart downtrend stalled as the market structure low (MSL) buy triggers above $93.07. The daily stochastic completed a full stochastic oscillation down and crossed up but is still under the 20-band. The daily market structure high (MSH) triggered a breakdown at $95.38. The daily rifle chart is set up to form a channel tightening towards the 15-period MA at $94.63 or an inverse pup breakdown if the stochastic fails to breakout through the 20-band and daily 5-period MA breaks down. Prudent investors can watch for opportunistic pullback levels at the $92.13 fib, $91.18 fib, $90.40 fib, $89.04 fib, $87.29 fib, $86.22, and the $85.09 fib. The upside trajectories range from the $100.40 fib up towards the $120.90 fib level.