Activision Blizzard (ATVI) develops and publishes interactive entertainment content and services worldwide. The stock is under profound pressure yet again, following news that its CEO Bobby Kotick allegedly knew about sexual misconduct at his company.
Kotick, who slashed his own pay by millions, is now being called on by shareholders to resign from the company, sending shares tumbling another 3% on Wednesday.
The calls for Kotick’s resignation should come as no surprise. At this juncture, investors seem to be looking for reasons to part with their battered shares of ATVI.
Undoubtedly, the head-and-shoulders top formation has already come to fruition, but most of the downside may already be lying in the rear-view mirror, as a massive change in management could be in the cards going into the new year.
Nothing has been going right these days with Activision Blizzard. Not only from this workplace practice matter that’s boiling over but also from a fundamental level. Recently, delays to two major Blizzard titles in Diablo IV and Overwatch 2 sent shares into a tailspin, adding to the negative momentum sparked by the ongoing workplace practice issues.
Despite all negative headlines, which continue to flow in, I believe the stock has been oversold, and the valuation looks incredibly attractive for longer-term investors willing to endure what could be a rocky transition, as calls for Kotick’s resignation intensify with employees walking out.
Although there are no easy ways to fix Activision Blizzard’s seemingly insurmountable list of problems, I am bullish on the stock. (See Analysts’ Top Stocks on TipRanks)
More Management Change Could Be Underway
Undoubtedly, the company has had a handful of executives departing due to the sexual misconduct allegations over the past several weeks. More could be on the way, and Bobby Kotick may have few options as employees continue to turn against him.
Whether Kotick goes or stays, Activision Blizzard stock still looks incredibly cheap after passing the torch to Roblox (RBLX), which is now the more valuable video-gaming company. While nobody knows what to make of the aftermath of Activision Blizzard’s harassment allegations or the extent of the material impact on the fundamentals, there is a road on the other side of the negatives that few investors can see.
Undoubtedly, Activision Blizzard still owns some incredible brands in the video-gaming world. Although major titles have been delayed by a year or more, gamers will be ready to pick up their controllers when the time comes. Moreover, Activision Blizzard may very well have the keys to its own version of the metaverse—something that few have been talking about amid sexual misconduct allegations.
Indeed, Activision’s Call of Duty: Warzone seems to be its most metaverse-like offering. It holds tremendous potential, as the number of supported players looks to grow with time. Moreover, Activision Blizzard is also a go-to play for eSports exposure, another incredibly powerful trend in gaming.
There’s no question that the headlines have been absolutely terrible of late, but the company’s brands can shine through. After such a vicious decline, shares of ATVI trade at 2.9 times book value and 5.5 times sales, not at all indicative of a company that has a front-row to some of the hottest growth trends in the gaming world.
Wall Street’s Take
Turning to Wall Street, Activision has a Moderate Buy consensus rating, based on 12 Buys and seven Holds assigned in the past three months. The average Activision Blizzard price target of $93.38 implies 46.3% upside potential.
Analyst price targets range from a low of $74.00 per share to a high of $118.00 per share.
The Bottom Line on ATVI Stock
Uncertainties couldn’t be greater as calls for Kotick’s resignation grow louder. In any case, Activision Blizzard is likely to overcome these headwinds eventually. Analysts remain bullish, with mostly Buy ratings and a $93.38 price target that implies around 46% upside from today’s levels.
Disclosure: Joey Frenette owned shares of Activision Blizzard at the time of publication.
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