Activision Blizzard (ATVI) fell 4.8% on May 3 to close trading at $47.15. This drop in stock price means that ATVI is currently trading 18% above its 52-week low of $39.85 and 44% below its 52-week high of $47.15.
ATVI’s sales fell from $1.97 billion in the first quarter of 2018 to $1.83 billion in the first quarter of 2019. Net income also fell from $445 million, or $0.58 per share, to $500 million, or $0.65 per share, in the same period. Analysts estimate ATVI to post sales of $1.23 billion and EPS of $0.23 in the first quarter.
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Though Activision beat earnings and sales estimates in the first quarter, the company has been struggling to gain investor confidence. Gaming companies have been impacted over the last 12 months by the overwhelming response to Fortnite and PUBG.
Activision sales are estimated to fall 11.7% this year. The global gaming market is expected to rise by over 10% in 2019. Activision also laid off 800 employees in February 2019 driven by growth concerns.
Is ATVI trading at an attractive valuation?
ATVI is trading at a forward PE multiple of 20.06x for 2019 and at 18x for 2020. In comparison, the company’s earnings are estimated to fall by 16% in 2019 and then gain 18% in 2020, which suggests that the stock is overvalued at the 2019 multiple.
Out of 27 analysts covering ATVI, 20 recommend a “buy,” and seven recommend a “hold.” There aren’t any “sell” recommendations. The average 12-month price target for ATVI is $52.75, indicating the stock is trading at a discount of 12% to average estimates.