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Activision Blizzard (ATVI) seems to be an attractive choice, as it has recently been upgraded to a rank 2 (purchase) Zacks ranking. This improvement mainly reflects the upward trend in earnings estimates, one of the most powerful factors affecting stock prices.
The evolution of the results of a company is at the heart of the note Zacks. The system follows the Zacks consensus estimate – the consensual measure of analysts' BPA estimates of the sell side covering the stock – for the current year and subsequent years.
Individual investors often struggle to make decisions based on Wall Street analysts' revaluation of their ratings, the latter being primarily motivated by subjective factors that are difficult to identify and measure in real time. In these situations, the Zacks rating system is useful because of changing earnings to determine short-term stock price movements.
As such, raising Zacks' rating for Activision Blizzard is essentially a positive comment on its earnings outlook which could have a favorable impact on its share price.
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The variation in a company's future earnings potential, as reflected in the revisions to earnings estimates, and the short-term price movement of its stock are found to be highly correlated. The influence of institutional investors contributes in part to this relationship, as these large professionals use earnings and profit estimates to calculate the fair value of a company's shares. An increase or decrease in the estimated earnings in their valuation models simply translates into an increase or decrease in the fair value of a stock, which institutional investors generally buy or sell. Their bulk investment action then drives a price movement for the stock.
Basically, the increase in profit estimates and the revaluation of the resulting rating for Activision Blizzard imply an improvement in the underlying business of the company. Investors should show their appreciation of this business trend by pushing the title higher.
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Empirical research shows a strong correlation between trends in earnings estimates and stock movements in the short term. It would be really rewarding to follow these revisions to make an investment decision. It is here that the proven Zacks Rank inventory evaluation system plays an important role in effectively leveraging the power of revisions to profit estimates.
For the fiscal year ended in December 2019, the manufacturer of "Call of Duty" and other video games is expected to earn $ 2.19 per share, representing a -15.8% change from the number announced a year ago.
Analysts have steadily increased their estimates for Activision Blizzard. In the last three months, Zacks' consensus estimate for the company has increased by 0.5%.
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In contrast to the overly optimistic Wall Street analysts, whose rating systems tend to be biased towards favorable recommendations, Zacks' rating system retains an equal proportion of "buy" and "sell" ratings for its entire universe of more than 50,000. 4000 shares at any time. Regardless of market conditions, only the top 5% of Zacks-backed shares are rated Strong Buy and the next 15% is Purchase. Thus, placing a share in the top 20% of Zacks-backed shares is a testament to its superior profitability review feature, making it a strong candidate for superior market returns over the short term.
Activision Blizzard's upgrade to Zack's rank 2 positions it among the top 20% of Zacks' stock in terms of revisions, implying that the stock could rise in the short term.
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Do you want to know the latest Zacks Investment Research recommendations? Today, you can download 7 best actions for the next 30 days. Click to get this free report
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Activision Blizzard, Inc (ATVI): Free Stock Analysis Report
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Zacks Investment Research"data-reactid =" 39 ">
Do you want to know the latest Zacks Investment Research recommendations? Today, you can download 7 best actions for the next 30 days. Click to get this free report
Activision Blizzard, Inc (ATVI): Free Stock Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research
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