Activision Blizzard Stock Climbs After Berkshire Hathaway Ups Stake

The move is part of a merger arbitrage play, as Microsoft zeroes in on ATVI

Digital Content Manager
May 2, 2022 at 9:55 AM
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During the company's annual meeting, Berkshire Hathaway's (BRK) Warren Buffett announced that the firm has increased its stake in gaming concern Activision Blizzard, Inc. (NASDAQ:ATVI). Berkshire now owns roughly 9.5% of Activision Blizzard's shares as it steadily increases its stake in a merger arbitrage bet, speculating that Microsoft's (MSFT) proposed acquisition of the company will close. In January, Microsoft said it intends to buy the company at $95 per share -- a roughly 25% premium to Friday's close. 

ATVI was last seen up 2% at $77.30 in response to the news. Since its late-January bull gap, Activision Blizzard stock has consolidated below the $81.50 level, though its 200-day moving average kept a mid-March pullback in check. On Friday, the shares slipped below this trendline, but look to have bounced from this level today. For 2022, the stock is up 16.3%. 

Despite, this mostly positive price action, analysts are still on the fence. Of the 21 in coverage, 13 say "hold" or worse, compared to eight "strong buy" ratings. Meanwhile, the 12-month consensus price target of $94.19 is a 24.65 premium to Friday's close. 

It's worth noting that now might be the perfect time to bet on the stock's next move with options. ATVI's Schaeffer's Volatility Index (SVI) of 18% sits higher than just 27% of readings from the past year. This means options players have been pricing in relatively low volatility expectations at the moment. What's more, Activision Blizzard stock's Schaeffer's Volatility Scorecard (SVS) ranks at 95 out of a possible 100, suggesting the stock tends to outperform said volatility expectations. 



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