Trading Nation

Activision Blizzard has shed more than half its value in 4 months, and one strategist says 'stay away'

Steer clear of Activision here, technician says

Activision Blizzard reportedly plans to announce job cuts when it posts fourth-quarter earnings Tuesday afternoon.

Its shares sank to their lowest level in two years on Monday following the report, the latest piece of news to rock the stock.

Last Wednesday, shares of the video-gaming giant dropped more than 10 percent after competitors Electronic Arts and Take-Two Interactive posted disappointing earnings.

The company has lost more than half its value in the last four months with shares dropping roughly 52 percent from their recent high in October.

The drastic move in the stock has the Street divided on whether this represents a bargain buy, or if investors should steer clear.

Oppenheimer's Ari Wald warned on CNBC's "Trading Nation" on Monday that Activision Blizzard is in a "bearish trend," and investors should "stay away from this stock."

From a technical standpoint, Wald noted that the stock hasn't been able to break above its 50-day moving average in the last month, and also that it dipped below its key support level of $45.

He also said Activision Blizzard doesn't look great compared with rivals — especially Electronic Arts. That stock fell more than 13 percent on Wednesday after the company reported disappointing earnings, but just two days later it surged 16 percent after early success of its new "Apex Legends" game. Wald's point is that while Electronic Arts has managed to rebound above its pre-earnings levels, Activision Blizzard is still stuck in a rut.

"EA has snapped back, Activision has continued to sell off, so that's relative weakness right there. Overall, timing lows is a poor long-term strategy. This is one to wait for it to stabilize," he said.

Michael Bapis, managing director of Vios Advisors at Rockefeller Capital Management, is bullish on Activision Blizzard in the long term, saying the company's diversified business channels makes it an especially compelling buy in a sector that's shown exponential growth.

"We think it's a classic restructuring of a rapidly growing company in a growth space," he said Monday on "Trading Nation." "They have one of the most diversified business lines relative to the competitors: They have the console gaming, and they have the mobile gaming and in the mobile gaming space they haven't even started to touch advertising revenue."

Traditional video-game makers like Activision Blizzard, Electronic Arts and Take-Two Interactive have all struggled to keep up with free-to-play games like the popular "Fortnite." But Bapis believes Activision's turnaround strategy, which includes plans to focus more on mobile, will drive future gains.

"There's going to be some turmoil. You're going to have to wait it out, but 12-18 months, we're long this space and long Activision because this [gaming] is just taking over society right now," he said.

Shares of Activision Blizzard have dropped 40 percent in the last year. Electronic Arts and Take-Two Interactive are down 19 and 14 percent, respectively.