Analysts downgrade Activision on fears of growth peak

Share price growth for US publisher Activision has reached a peak, according to two key analysts who have downgraded their ratings of the company this week - although both maintain that long-term prospects remain strong.

Wedbush Morgan analyst Michael Pachter has removed Activision from the firm's Focus List, stating that the strong growth of the company's stock since October already reflects most of the positive news for the current year and that no further near-term growth drivers are anticipated.

The ATVI stock has grown by some 40 per cent since mid-October, a rate of appreciation which Pachter describes as "perhaps a bit early," and while Wedbush Morgan is maintaining a Buy rating on the stock, he believes that sales data for November and December may be disappointing for Activision.

"We think that Activision's international sales will be higher than in past years, but expect negative investor reaction to year-over-year declines in US sales," he commented in a research note earlier this week.

His sentiments are echoed by analyst Boris Markovich of TerraNova Institutional, who has downgraded ATVI to a Neutral rating this week, citing a "belief that the stock's valuation is getting ahead of company fundamentals."

Both analysts, however, maintain that Activision is still an attractive long-term investment, with significant growth expected especially in overseas markets such as Europe. Markovich is advising investors to watch for low points in the coming months as attractive entry points for long-term investment.

Interestingly, TerraNova has also downgraded its rating on market leader Electronic Arts, stating that the stock is fully valued for the near term, with no further major rises expected in the near future - although again, Markovich is positive about the long-term prospects for the company, which he expects to continue as "the clear sector leader."