Goldman Adds Video Game Stock to Conviction List

Goldman Sachs praised ATVI's video game franchises

Managing Editor
May 28, 2019 at 10:19 AM
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The shares of Activision Blizzard, Inc. (NASDAQ:ATVI) are up 4.9% to trade at $44.37 this morning, after Goldman Sachs upgraded the video game name to "buy" from "neutral," and added it to the "conviction list." Along with a price-target hike to $54 from $50, the analyst in coverage lifted its 2020-2021 earnings estimates for Activision, and praised content updates for game franchises such as "Overwatch" and "World of Warcraft."

Activision Blizzard stock is fresh off its worst weekly loss of 2019. The shares have traded in a tight range for most of the year, with the $40-$42 region cushioning pullbacks, and the $48-$50 area keeping a lid on breakouts. Despite today's positive price action, ATVI is still staring up at its year-to-date breakeven point around $47. 

In the options pits, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) suggests that speculators have preferred ATVI puts over calls of late. The equity's 10-day put/call volume ratio across the exchanges is 0.68. While this indicates calls still outnumbered puts on an absolute basis, the reading registers in the 88th percentile of its annual range, suggesting the rate of put buying relative to call buying has been quicker than usual.

Echoing this, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.56 ranks in the 100th annual percentile. This means short-term speculators haven't been more put-heavy in the past year, when looking at open interest among options expiring within three months.

The good news for traders is that short-term ATVI options are attractively priced at the moment. The security's Schaeffer's Volatility Index (SVI) of 34% ranks in the 15th percentile of its 12-month range, meaning near-term contracts are pricing in relatively low volatility expectations.



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