Bernstein Downgrades Activision Blizzard on Valuation Risk

Most analysts are still bullish on ATVI stock

Oct 2, 2019 at 9:59 AM
facebook twitter linkedin

Bernstein downgraded Activision Blizzard, Inc. (NASDAQ:ATVI) to "underperform" from "market perform," saying, "the market is paying too much on the hope that this is the trough." The brokerage firm went on to say that it "cannot reconcile the current stock price with ATVI's risk-adjusted fundamentals," but raised its price target on the video game stock to $43 from $41 following its recent run higher.

In reaction, Activision Blizzard stock has swung 2.2% lower to trade at $51.80, but is still up almost 24% since its late-May lows south of $42. Longer term, ATVI shares are up roughly 10% year-to-date.

The majority of analysts remain upbeat toward ATVI. Prior to today, 20 brokerages maintained a "buy" or better rating, compared to six that called the stock a "hold." However, the average 12-month price target of $57.03 is a tame 7.8% premium to last night's close.

Options traders are bullish, too. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ATVI stock's 10-day call/put volume ratio of 11.30 ranks in the 100th annual percentile, meaning calls have been bought to open over puts at an accelerated clip.

The weekly 10/11 55-strike call has seen the biggest increase in open interest over this two-week time frame, with nearly 13,000 contracts added. Data from Trade-Alert points to mostly buy-to-open activity at the weekly option, meaning traders are betting on a breakout above $55 by the close next Friday, Oct. 11.




These investors are using the market's volatility to their advantage and scoring triple-digit gains on many of their trades.

Even in today's sideways bear market, this trading strategy has continued to provide consistency and profitability to a small group of investors. By using this approach, these traders are removing directional risk and still hitting triple-digit returns. If you want access to this strategy, and lower risk with higher returns sounds good to you, then don't wait another minute.

Join us now to receive our next trades the moment they come out!


Common mistakes options traders make


Special Offers from Schaeffer's Trading Partners