Activision Blizzard (ATVI): Overwatch and Digital Drive A 2Q Beat - Baird
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Baird analyst, Colin Sebastian, reiterated his Outperform rating on shares of Activision Blizzard (NASDAQ: ATVI) after Q2 results beat expectations driven by a successful Overwatch launch and ongoing Digital momentum.
Activision reported non-GAAP revenues and EPS well above consensus expectations (+112% Y/Y, +53% ex-King), driven primarily by 129% Digital revenue growth (87% of total.) King indicated that Candy Crush franchise revenues grew Q/Q and Y/Y, with no discernible impact to-date from Pokemon Go.
The analyst stated that "Key drivers remain positive, including console installed base, mobile usage, in-game monetization and Digital mix shift. On the call, management indicated there were $1 billion of in-game content sales (including doubling of Call of Duty content) along with sustained or higher levels of engagement. We note that Overwatch and World of Warcraft are also helping AB carve out a larger market in Asia (e.g. China and Korea.) Looking ahead to the holiday period, Call of Duty: Infinite Warfare preorders are still tracking below last year levels, although in-line with management's expectations. The company plans to accelerate marketing efforts for the game closer to launch. Lastly, Pokemon Go does not appear to be impacting usage or monetization of Candy Crush, consistent with commentary from other publishers".
Based on increasingly Digital-oriented revenues and the successful launch of Overwatch, reiterating Outperform rating, raise price target to $46.
price target of $46.00 (from $43.00)
Shares of Activision Blizzard closed at $40.83 yesterday.
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