Should I invest in Activision Blizzard shares after BMO Capital raised its price target to $116?

Activision Blizzard, Inc. (NASDAQ: ATVI) shares are advancing this Thursday, and the technical picture implies that the price could reach $100 resistance this May. Activision Blizzard continues to expand its business, but this company is not undervalued at the current stock price.

Fundamental analysis: Activision Blizzard trades at more than twenty times 2020 EBITDA

Activision Blizzard shares continue to be supported after the company reported better than expected first-quarter results in the first trading week of May. Total revenue has increased by 36.2% Y/Y to $2.07 billion, while the GAAP EPS was $0.79 (beats by $0.14).

The company achieved revenue growth across all business segments; Activision segment revenue has risen 72%, Blizzard revenue has increased by 7%, and King segment revenue has increased by 22%. Operating cash flow was $844 million compared with $148 million for the first quarter of 2020.

Activision Blizzard finished this quarter with 435 million monthly active users (MAUs), and the company began the second quarter in a strong position. Positive information is that global video game sales rose 30% during the first quarter, and according to estimates, ATVI could have another strong quarter.

BMO Capital has raised its price target to $116 from $104 on Activision Blizzard after the first-quarter earnings report as it sees this company well-positioned for success in 2021 and, more importantly, beyond.

The current dividend yield stands around 0.5%, and it is important to mention that the board of directors announced this year a stock repurchase program of up to $4B of its outstanding common stock during the period of two years.

Activision Blizzard is a stable company with a good position in the market, but with a market capitalization of $73 billion, we can notice that this stock is not undervalued. Activision Blizzard trades at more than twenty times 2020 EBITDA, the book value per share is less than $20, and the current risk/reward ratio is not good enough for "value" investors.

Technical analysis: $100 represents the first resistance level

Activision Blizzard shares are advancing this Thursday, and for now, the positive trend remains intact. If the price jumps above $100, the next target could be around $110, but if the price falls below the $90 support level, it would be a firm "sell" signal.

Summary

Activision Blizzard reported better than expected first-quarter results this month, and BMO Capital has raised its price target to $116 from $104. Activision Blizzard is a stable company with a good position in the market, but the current risk/reward ratio is not good enough for "value" investors.