Bank of America: Buy Activision Blizzard Over Electronic Arts

Justin Post, research analyst at Bank of America issued a research note on Thursday in which he favors Activision Blizzard ATVI over Electronic Arts EA on the belief that Activision will have more “title excitement” over the next few months. Electronic Arts recently released the much anticipated Titanfall game but this is where the hype ends. EA only has one new title for the rest of the year (FIFA World Cup) and no next-gen specific titles. As such, according to Post, the next major catalysts for Electronic Arts won't occur until 2015 with the release of a Dice developed Battlefield and a Star Wars title. Activision, on the other hand, has many upcoming catalysts including a Diablo 3 expansion (March 25), Destiny (September 9), a World of Warcraft expansion (second half 2014), Hearthstone (out of Beta this quarter), and a potential expansion of an online version of Call of Duty to China which could be a “sentiment catalyst into 2015.” Post argued that Activision's Destiny could be “the” title of the Electronic Entertainment Expo and not EA's Titanfall. Both titles are competing for the unofficial title of the “best next-gen game.” Bottom line Next-gen hardware sales are tracking well compared to prior consoles which should give investors confidence that the industry is growing. “Hardware adoption is a top leading indicator of potential future software sales and we continue to expect a growth year for the industry in 2015,” argued Post. Activision was upgraded to Buy from Neutral with a price target raised to $25 from a previous $20, reflecting an 18x CY15E EPS which was raised to $1.38 from $1.31. EA was downgraded to Neutral from Buy with a price target lowered to $35 from a previous $36, reflecting an 18x FY16E EPS.