C-Suite Shake-Up Puts Pressure on Activision Blizzard Stock

Activision Blizzard stock fell to an annual low last week

Managing Editor
Jan 2, 2019 at 9:37 AM
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The shares of Activision Blizzard, Inc. (NASDAQ:ATVI) are poised to start off the new year on a dour note, down 2% this morning at $45.62. Late Monday night, a securities filing revealed the video game maker had placed Chief Financial Officer (CFO) Spencer Neumann on paid leave, with plans to terminate him. According to the Wall Street Journal, Neumann is expected to be named the new CFO (subscription required) of Netflix (NFLX). Dennis Durkin has been reappointed as Activision Blizzard's CFO.

Activision Blizzard stock shed 44% last quarter, its worst since 2000. A bear note helped stoke the holiday headwinds, sending ATVI to an annual low of $43.71 on Dec. 26. While the shares briefly bounced from there, they have been turned away once more by their 20-day moving average, a level of resistance since early October .

There's reason to believe things could get worse for ATVI. For one, most analysts are still bullish on the equity, so more bear notes could put pressure on the shares. Of the 23 brokerages covering ATVI, 19 rate it a "buy" or better, while its consensus 12-month price target of $70.81 is a 55% premium to Monday's closing perch of $46.57. 

Shorts have been heading for the exits, though. Short interest fell by 17% in the last two reporting periods to 17.95 million shares, the fewest since mid-August. This represents a meager 2.4% of the stock's total available float, indicating there is ample room aboard the bearish bandwagon.

There is also optimism to be unwound in the options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ATVI's 10-day call/put volume ratio of 3.44 ranks in the 86th annual percentile. This shows not only that long calls have outnumbered puts by a more than 3-to-1 ratio, but options traders have quickly picked up the pace of call buying relative to put buying in recent weeks.

Regardless of direction, those wanting to bet on the video game stock may want to consider an options buying strategy, as ATVI has been a strong target for anyone buying premium over the last 12 months. This is per the stock's Schaeffer's Volatility Scorecard (SVS) of 93 out of a possible 100, which indicates the security has tended to make outsized moves over the past year, relative to what the options market has priced in.


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