Barclays: Activision Blizzard Is The Next Key Battle Royale Player

Activision Blizzard, Inc. ATVI’s "Call of Duty: Black Ops 4" has become the company's biggest digital launch of all time since its Friday release. Barclays raised estimates on the video game company on the basis of battle royale buzz and ramping product announcements.

The Analyst

Analyst Ryan Gee upgraded Activision Blizzard from Equal Weight to Overweight and raised the price target from $79 to $86.

The Thesis

Activision Blizzard is one of the premier content creators in the media landscape and is therefore well-positioned to capitalize on a blend of gaming themes, like the increasingly popular battle royale style, Gee said in the upgrade note. (See his track record here.) 

“Early engagement metrics point to 'CoD' taking back a material share of players that shifted to 'Fortnite' throughout 2018 — including three times more viewers Y/Y vs. 'CoD WW2,' three times more viewers than 'Fortnite' this weekend, and 10-15 percent fewer 'Fortnite' viewers than is normal," the analyst said. "As a result, we are more positive on 'CoD' digital revenue contribution in 2019 from battle royale and estimate each new 1 million players represents 3 cents in 2019E EPS.”

New games are also expected on the Blizzard docket in 2019; Gee anticipates product news at BlizzCon in November.

The analyst remains optimistic on the entire space.

“Taking a step back, we continue to have a very bullish view on the video gaming space and expect the shift from physical to digital content distribution to continue enhancing margins for all publishers we cover," Gee said. 

Gaming should continue to command a greater share of disposable income and discretionary time from traditional media, especially among younger players, in light of new technology such as streaming and cloud gaming; new play mechanics like battle royale and multiplayer co-op; and new player purchases like cosmetic items and micro-transactions, according to Barclays. 

Price Action

Activision Blizzard shares were down 3.64 percent at $75.08 at the time of publication Monday. 

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Screenshot courtesy of Activision Blizzard.