Activision Blizzard: Strong Fundamentals And An Upwardly-Sloped Trend Channel Earn The Stock A Strong Buy Rating

Video game publisher Activision Blizzard (ATVI) has seen its games gain in popularity in the past year. The company has seen earnings and revenue increase in the last few quarters and the stock has been climbing as a result. Apparently, people have been buying more video games while they were forced to stay at home. All of this adds up to a stock with strong fundamental indicators and an upwardly sloped trend channel on the chart.

Let’s take a look at the fundamental indicators first. Tickeron’s fundamental analysis screener shows that the company scores really high on its Outlook Rating, Profit vs. Risk Rating, SMR Rating, and Seasonality Score. The only area where it scores poorly is the P/E Growth Rating. The Valuation Rating and the Price Growth Rating both fall in the average range.

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If we look at some of the indicators that are included in calculating the ratings, we see why the stock ranks so highly. In the fourth quarter of 2020, Activision saw earnings jump by 23% compared to the same period in 2019. Revenue jumped by 22% for the quarter. Those growth rates are considerably higher than what we have seen in recent years, but analysts expect earnings and revenue to grow more rapidly in the coming years. Earnings are expected to increase by 14% in 2021 while revenue is expected to grow by 1.3%. The expectations for 2022 are much higher with revenue predicted to grow by 13.5%.

Activision’s profitability measurements are well above average as well. The return on equity is 17.9% and the profit margin is at 37.2%. The average ROE for the industry is only 4.78% and the average profit margin is 22.78%.

The Stock Doubled in 11 Months after the 2020 Low

Activision dropped to a low of $50.18 in March 2020 and by February of 2021, the stock had moved above the $100 mark. If we connect the low from last March with the recent low, we get the lower rail of a trend channel. The stock did drop below the lower rail last November, but it never closed a week below the rail. The parallel upper rail connects the highs from last May and from February. The stock did move slightly above the upper rail last August, but it never closed a week above it.

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