Barbarian At The Gate: Activision Blizzard (ATVI)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Activision Blizzard ( ATVI) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Activision Blizzard as such a stock due to the following factors:

  • ATVI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $118.3 million.
  • ATVI has traded 4.2 million shares today.
  • ATVI traded in a range 206.9% of the normal price range with a price range of $0.90.
  • ATVI traded above its daily resistance level (quality: 12 days, meaning that the stock is crossing a resistance level set by the last 12 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on ATVI:

Activision Blizzard, Inc. develops and publishes online, personal computer (PC), video game console, handheld, mobile, and tablet games worldwide. The stock currently has a dividend yield of 1%. ATVI has a PE ratio of 20.1. Currently there are 18 analysts that rate Activision Blizzard a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Activision Blizzard has been 5.1 million shares per day over the past 30 days. Activision Blizzard has a market cap of $16.5 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.64 and a short float of 4.3% with 3.70 days to cover. Shares are up 12.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Activision Blizzard as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, increase in net income and attractive valuation levels. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • ATVI's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 3.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • ACTIVISION BLIZZARD INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ACTIVISION BLIZZARD INC increased its bottom line by earning $1.14 versus $0.95 in the prior year. This year, the market expects an improvement in earnings ($1.18 versus $1.14).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 108.7% when compared to the same quarter one year prior, rising from $173.00 million to $361.00 million.

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