Activision (ATVI) Lands 'Sweet' Deal with Kind Purchase; MKM Affirms at 'Buy'
MKM is positive on Activision (Nasdaq: ATVI) following news that the company will acquire King Digital.
Analyst Eric Handler noted, The $5.9bn acquisition of King Digital: (1) transforms Activision into a leader in the mobile gaming industry; (2) is significantly accretive; (3) is attractively valued; and (4) is being financed tax efficiently. This news follows the recent high profile hiring of former ESPN and NFL Network head Steve Bornstein to develop an eSports platform (an event likely to be discussed at length at this Friday's investor meeting). These two business units create new levers that complement Activision's leading console and PC franchises.
On King: Among mobile games, the Candy Crush franchise has few peers. Activision will now own a leading brand and a platform it could not have replicated on its own. With three new titles slated for release in 2016, including Kings's first midcore game, the business is positioned to more broadly monetize a segment that is projected to increase from $36bn in 2015 to $56bn by 2019.
Handler is adjusting the following estimates: FY15 EPS from $1.34 to $1.35 and Q4 revenue and EPS outlook to $2.215 billion and $0.85, from $2.273 billion and $0.90.
MKM has Activision at Buy with a price target of $38.
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