Activision Blizzard (ATVI): Weaker Guide Than Expected - Macquarie
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Macquarie analyst, Ben Schachter reiterated his Outperform rating on shares of Activision Blizzard (NASDAQ: ATVI) believing the earnings upside should negate the weak guidance in time.
ATVI posted a solid quarter, but the holiday guide was weaker than expected. Blizzard is clearly the key driver of upside in terms of engagement, rev, and margin, as WoW and Overwatch both continue to perform better than expected.
The analyst expects that the trends around global expansion, in-game monetization, and growing digital distribution all play to Blizzard’s strengths. If the franchises remain healthy, Blizzard will likely be key for ATVI’s long-term success.
However, the analyst is more concerned about the status of Activision titles including Skylanders and Destiny, and to a lesser extent CoD. CoD’s performance this holiday may be impacted by the strength of FPS competitors, but in-game content and the brilliant move of bundling a remastered Modern Warfare will help.
Regarding King, the analyst is concerned about weakening engagement, but the advertising opportunity is real and we expect revenue should start to ramp in 2H’17 and be a meaningful high-margin contributor by ’18.
No change to the price target of $46.
Shares of Activision Blizzard closed at $43.37 yesterday.
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