Activision Blizzard (ATVI) Becomes a Leader in Mobile Gaming with King Digital Entertainment (KING) Acquisition; MKM Partners Reiterates Buy
MKM Partners reiterated a Buy rating and $38.00 price target on Activision Blizzard (NASDAQ: ATVI), following the company's announced acquisition of, mobile gaming company, King Digital Entertainment (NYSE: KING). 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.
Analyst Eric Handler commented, "In the span of a little more than one week, Activision has added two new drivers within fast growing video game segments. 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. We reiterate our $38 PT (22x 2016E EPS) but believe King could add an incremental $8-$10 p/s of value."
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Shares of Activision Blizzard closed at $34.57 yesterday.