Video game maker Activision Blizzard (ATVI) recently traded up to a new record high, despite a disappointing fourth-quarter earnings report in February. The company missed estimates on both the top and bottom line, which initially led to a dip in the stock, but shares have rebounded and hit a new all-time high on March 7. With the stock’s current price, the valuation has become a concern. The stock now has a P/E of 37.6, which is a bit high for the stock, especially considering that analysts forecast earnings to fall by 11.4% this year. So far, traders have been willing to overlook the expected earnings decline, but considering the declining earnings, and the stock’s current valuation, shares are priced for perfection, and any signs of weakness could result in a major sell off in the stock.
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