JP Morgan Upgrades Activision to Overweight

Analyst Dean Gianoukos believes the sell-off is overdone for this video-game maker

JP Morgan upgraded Activision (ATVI ) to overweight from neutral.

Analyst Dean Gianoukos says valuation appears attractive, and he believes the Street's earnings per share estimates for fiscal 2005 (Mar.) are too low. After adjusting for the company's $3.78 per share cash balance, the stock is trading at a p-e of 69% of the S&P 500, based on his new 85 cents fiscal 2005 earnings per share estimate (raised today from 70 cents). This is well below the five-year average of a 15% premium, and below the 85% relative p-e multiple that Activision achieved at this time in the same stage of the last cycle.

Gianoukos thinks strong retail sales starting in May or June, continuing upward earnings per share revisions, and cheap valuation could lead to above-market returns with limited downside. He sees 63 cents fiscal 2006 earnings per share.