Activision Blizzard, Inc. ATVI reported better-than-expected earnings Nov. 2 and raised its full-year guidance.
The Analyst
Goldman Sachs' Christopher Merwin upgraded the stock from Neutral to Buy and raised the price target from $67 to $73.
The Thesis
Merwin sees the stock as a high-class asset that trades with a discount to peers ahead of a period of accelerating earnings growth that he projects will occur over the next two to three years. (See Merwin's track record here.)
Goldman raised its EPS estimate for Activision on the basis of potential sequels for games such as "Diablo" and "Overwatch" and the expectation of a Blizzard mobile game, Merwin said.
The release of the "Diablo" sequel is expected in 2019, and Merwin estimates that 15 million units will be sold. "Overwatch 2" is expected in 2020, he said. Goldman's 2019 and 2020 estimates are now above Wall Street consensus at 4.5 percent and 9 percent, respectively.
The Price Action
Activision Blizzard traded around 2 percent higher Tuesday. It recently pulled back from its 52-week high of $67.03, but rebounded after hitting $57.29 and closed Tuesday at $64.37.
Related Links:
Mobile Monetization Makes Its Mark In Activision's Q3 Beat
February Digital Gaming Round-Up: Activision's Blues, EA Titles On Top, Ubisoft Makes A Splash
Photo courtesy of Activision.
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