took a hit Tuesday after an influential analyst removed the company from his focus list.
The video game publisher's stock has zoomed up 40% in the last two months, noted Wedbush Morgan Securities analyst Michael Pachter. While it hasn't yet hit Pachter's price target, the company soon may see disappointing sales and earnings news, reducing the possibility that the stock will continue to rise in the near future, he said.
"Most of the positive news expected for the current fiscal year
is already reflected in the stock," Pachter said in a report issued Tuesday. (Activision is not a recent investment banking client of Wedbush Morgan.)
In recent trading, Activision shares were off 64 cents, or 3.6%, to $17.08.
In the last year, Activision has secured its place as the second-leading video game publisher behind industry giant
. Boosted by sales of titles such as
, Activision has seen its revenue grow nearly 90% in the first half of this fiscal year over the same period last year. That jump in sales has helped the company turn around its business from a $5.9 million loss in the first half of last year to a $37.5 million profit this year.
Activision's stock price has reflected its improving fortunes. Despite Tuesday's selloff, the company's shares are up 41% for the year.
But the company may be due for some disappointments, Pachter warned. Industry research firm NPD is set to release its data on November game sales on Thursday. That data -- as well as sales figures from December -- could well be disappointing, Pachter said. Analysts have expected that fewer than 10 games will dominate holiday sales, led by
Grand Theft Auto: San Andreas
Activision has been pushing to expand its sales overseas. That effort may well pay off this holiday season, Pachter said. But such good news may not be enough to help the company's stock in the short-term, he said.
"We ... expect negative investor reaction to year-over-year declines in U.S. sales," he said.
But Pachter remains positive on the company's long-term outlook and maintained his buy rating on its shares. The analyst has a price target of $18 on Activision's stock.
"We ... continue to believe that the company will generate significantly higher catalog sales next year from its strong lineup," he said.