Activision Blizzard (ATVI) Gets Ready for Overwatch - Jefferies

Jefferies analyst, Brian Pitz, is positive on Activision Blizzard (NASDAQ: ATVI) after the company posted a solid beat in a relatively slow quarter that did not feature any AAA game launches. Non-GAAP revenue grew +29% Y/Y to $908MM, well above $800MM outlook and $813MM consensus. Non-GAAP EPS grew +44% Y/Y to $0.23, well above $0.11 outlook and $0.12 consensus. Of the $0.12 in Outperformance relative to guide, ~$0.07 was related to timing, about $0.03 was from strong franchise momentum and the earlier King close, and $0.02 was due to a 1x tax benefit. Guidance is ahead of Street: ATVI expects NG rev / EPS of $1.375B / $0.38 vs. Street $1.331B / $0.34.

Overwatch is launching May 24 and is the next big catalyst. Management says it will be Blizzard's biggest launch since Diablo in 2012 (12MM units in yr-1). We believe Destiny, which generated $500MM in day-one sales, is the better comp. Compared to Destiny, Overwatch will have an important high-margin PC SKU and the game should be a big eSports title.

The firm maintained a Buy rating and $45 price target. The stock is also a Jefferies' Franchise Pick.

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 $34.91 yesterday.

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