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Why Shares of Activision Blizzard Fell More than 27% Last Month

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Dec. 3 2018, Published 2:07 p.m. ET

Massive fall in ATVI

Last month was a volatile one for the market. Broader indexes such as the S&P 500 Index (SPY) were flat, while the Technology Select Sector SPDR ETF (XLK) fell 2%. In this series, we’ll look at the performances of gaming companies in November.

Shares of Activision Blizzard (ATVI) fell 27.6% to close at $49.88 last month. The stock is currently trading 41% below its 52-week high of $84.68. It last traded at this level around March 2017.

Activision Blizzard stock has now fallen 40% since the start of the fourth quarter and 21% in 2018.

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Stock fell after its quarterly results

Activision Blizzard announced its third-quarter earnings results on November 8 and reported revenue of $1.66 billion, which was in line with estimates. The company’s non-generally accepted accounting principles EPS were $0.52, higher than the estimate of $0.50.

However, the stock fell almost 10% in after-hours trading driven by a fall in its number of monthly active users for the third consecutive quarter. Activision’s revenue guidance of $3.05 billion in the fourth quarter was marginally lower than analysts’ estimate of $3.06 billion. Activision expects its EPS to be $1.27 in the fourth quarter, below the consensus estimate of $1.34.

The company also stated that sales of its highly popular Destiny franchise were below expectations. A few days prior to ATVI’s earnings release, its stock fell close to 7% driven by fans’ negative reaction to the company’s Diablo Immortal mobile game announcement.

Analysts’ recommendations

So have Activision shares bottomed out? Of the 27 analysts tracking ATVI, 20 have given it “buys,” seven have given it “holds,” and none have given it “sells.” The average stock price target for Activision Blizzard is $73.69, indicating a potential upside of 48% from its current price.

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