Brean Capital reiterates a Buy rating on Activision Blizzard Inc. (NASDAQ: ATVI) and raises the target price to $28 (from $27), after 1Q15 review showed ATVI out ahead of guidance. Excluding FX pressures and any major releases, the new outlook for 2015 implies strong underlying fundamentals from recurring digital revenue.

Brean analyst Todd Mitchell reported on ATVI saying, "Last night Activision reported 1Q15 revenue of $703 million and non-GAAP EPS to $0.16. Revenue was down 9% from a year ago, and non-GAAP EPS was off 17%, due to a tough comp versus the launch of Diablo III: Reaper of Souls for PC last year, but both figures were well ahead of guidance for the quarter
of $640 million and $0.05, and consensus estimates of $654 million and $0.07. Results were driven by a 28% increase in Activision segment revenue to $303 million, underpinned by y/y growth in both units sold and online ARPU for COD, and sustained attach rates for Destiny. Moreover, management highlighted that both revenue and EPS would have been flat excluding FX pressures. Upside from our estimates came from y/y growth for Skylanders and higher-than-expected catalogue sales of prior-gen consoles, both of which were offset by a drop off in World of Warcraft revenue and subscribers."

Mitchell also added that, "Blizzard reported faster-than-expected attrition in World of Warcraft subscribers to 7.1 million, although the introduction of new micro-transaction elements should increase ARPU. We continue to believe that management consistently holds a bias towards conservative guidance, which in this year is exacerbated by the similar tendency to set low expectations for IP with novel business models, such as the F2P titles Hearthstone and HotS, the six franchises based in China, and the reintroduction of Guitar Hero. Considering the continued strength in current-gen console sales, the growing role of major franchises on them, and the shift towards F2P titles on PC, we continue to believe that Activision is well-positioned ahead of industry trends. As a result, we are raising our target price to $28 from $27 and reiterate our Buy rating."

For an analyst ratings summary and ratings history on Activision Blizzard click here. For more ratings news on Activision Blizzard click here.

Shares of Activision Blizzard closed at $23.20 yesterday.