Activision Blizzard: A Unique Chance to Catch a Bullish Wave

Activision Blizzard, Inc. (NASDAQ:ATVI) with its market capitalization of $16.84B is a publisher of online, personal computer, console, handheld, mobile and tablet games. The Company offers games that operate on Xbox One, Xbox 360, Wii U, Wii, PlayStation 4, PlayStation 3, among others. It also maintains an online-game related service, The company’s games include Call of Duty, Heartstone, World of Warcraft and Destiny among others.

I became fascinated with how to trade the options of Activision Blizzard after the impressively bullish trading performance that the stock displayed in yesterday’s session. The shares of Activision Blizzard climbed an incredible 5.22% to close at $24.41 after the stock has made a new 52-week high of $24.60. The new 52-week high marks a 38.74% increase over the stock’s 52-week low of $17.73.

Interestingly, the stock has a 50-day moving average of $23.10, which is higher than the 100-day moving average of $21.98, which is in turn higher than the 200-day moving average of 21.98. Hence, it is glaring that the shares of Activision Blizzard are in an uptrend and options traders should catch the bullish wave to profitability on ATVI call options.

Why is Activision Blizzard in an Uptrend?

The uptrend being recorded in the shares of Activision can be traced to the optimistic feelings leading to the release of the company’s first quarter (Q1 2015) results on Wednesday, and the fact that the company did not disappoint in the earnings. The highlights of the first quarter earnings result are presented below:

Activision reported first quarter earnings of $0.16 per share to more than double the consensus estimate of $0.07 per share. The first quarter earnings beat marks the 18th consecutive quarter of earnings beat for Activision. Activision has beaten estimates in 19 out of the last 20 quarters.

The company reported GAAP net revenues of $1.28B to beat the revenue of $1.11B from the first quarter of 2014. On a non-GAAP basis, the company reported revenue of $703M, which marks an 8.9% Y-o-Y decline. However, the non-GAAP revenue beats the consensus estimate of $655.36

The company’s Destiny and Heroes of Warcraft now have more than a combined 50 million registered players and the games have generated almost $1B in non-GAAP revenue in their lifetimes

Going forward, Activision expects EPS of $0.07 on revenue of $650M in the second quarter. In the FY 2015, the company expects EPS of $1.20 on revenue of $4.43B.

Can Activision Continue Higher?

The optimistic second quarter and full year guidance that the management gave provides a clear indication on the level of optimism on the part of the company. Nonetheless, if the management and investors are not on the same page, an optimistic guidance might end up doing more harm than good. However, the one-year trading chart of Activision (below) provides an insight into what investors think about Activision, and it sheds more light on where the stock might be heading.

ATVI Chart

From the chart, you’ll observe that the shares of Activision dropped to somewhere around $18 twice between October 2014 and January 2015 as shown by the blue parabola. You’ll also notice that the stock entered an uptrend between mid-January and mid-February. The uptrend eventually led the stock into a range marked by a $22.7 support and a $23.5 resistance. Interestingly, the quality of the first quarter earnings has caused the stock to breakout above the range and we can realistically expect new highs to follow.

I am bullish about the prospects of Activision and I recommend buying ATVI call options. You’ll do well to consider the ATVI Aug 2015 25.000 call (ATVI150821C00025000) at an asking price of $1.16.

— Daily Option Alerts

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