Activision Blizzard Inc. ‘s shares closed Friday at the highest price since 1984, or at an all-time high if you take multiple stocks into account, after strong earnings and a prospect that wants to take more advantage in the fast-growing mobile gaming market. .
Activision Blizzard ATVI,
The stock rose more than 12% on Friday and closed 9.6% at $ 101.61. This is the first time that Activision’s share price has ended above $ 100 since January 20, 1984, when the stock closed at $ 103.12, according to FactSet data. However, according to the FactSet, the nine stocks have since reached a record market of $ 78.53 billion.
Late Thursday, Activision Blizzard reported quarterly results and a outlook that exceeded Wall Street expectations, along with plans to expand more of its franchises to mobile devices. The company publishes the popular “Call of Duty” franchise under its Activision brand, its “World of Warcraft” franchise under its Blizzard brand, along with its franchises “Overwatch” and “Diablo”, and “Candy Crush” under its King brand. Activision acquired Blizzard in 2008 through its merger with Vivendi’s gaming business and King Digital Entertainment in 2016.
Over the past few years, mobile games have been the fastest-growing platform for video games, accounting for about $ 180 billion in 2020 sales, with computer and console-based games, according to IDC data.
Of the 34 analysts covering Activision Blizzard, 28 have purchase prices on the stock, five have selection ratings and one has a sales rating, according to FactSet. Of those, 20 increased their price targets and the average price target on the stock increased to $ 108.86 from a previous $ 92.68, according to FactSet data.
JPMorgan analyst Alexia Quadrani, who has an overweight rating on the stock and raised her price target from $ 101 to $ 115, expects the “Call of Duty” franchise to be the model for the company’s other titles.
Not only does “Call of Duty” follow the traditional route of console and computer sales with its “Black Ops – Cold War” and “Modern Warfare” titles, but the franchise has a free “Warzone” Battle Royale option similar. to Epic Games Inc. ‘s “Fortnite”, with all the options available on a mobile platform.
The success at CoD in 2020 significantly improved expectations at the beginning of the year (even adjusted for the pandemic), and we expect ATVI to apply similar business model innovation to other titles, using mobile devices to achieve and expand free play modes. to promote the conversion of players to premium games, ”said Quadrani.
Stifel analyst Drew Crum, who has a buyout price and a price target of $ 108 on the stock, remained positive about the potential developments at the company, although he considered the results mixed.
“However, we think this is being replaced by the (positive) comments from management on ’21 (and beyond), which provide a larger context around the timing of key initiatives, and which is apparently a potentially massive year in ’22, ” Crum said.
Andrew Marok, analyst at Raymond James, which achieved a better performance rating and raised its share price target from $ 109 to $ 120, says he still thinks the company’s a lot of groundwork to reach new players through mobile and free offers and to take advantage of strong demand for planned new titles in existing franchises. ”
UBS analyst Eric Sheridan, who has a buy rating and raised his price target from $ 120 to $ 120, said Activision Blizzard has kept the theme of the past 12 months faithful.
The company’s earnings report shows how the broader industry has benefited from ‘stay at home’ dynamics, but still focused on the [long term], ”Sheridan said.
“In the latter, the industry intends to be a net shareholder in media use, taking advantage of the blurring of the line on the platform and the game preferences through a global base (firstly increasingly mobile) and still allocating capital to a mix of growth and shareholders, ”said the UBS analyst.
Wells Fargo analyst Brian Fitzgerald, with an overweight rating and a $ 120 price target, asked in a comment, “How big and profitable can this thing become?”
Last year, Activision Blizzard outlined four pillars of its long-term strategic growth: more new versions, improved operations, the expansion of popular computer and console games to mobile platforms, and the addition of ‘new engagement models’, such as branching into city-person leagues and sports.
According to Fitzgerald, management is “clear” that they expect a ‘step change’ in financial performance in FY22, and we have no reason to doubt their ability to pursue the four-pillar growth strategy for franchises other than ‘Call of Duty’. do not feed. “
Piper Sandler analyst Yung Kim, with an overweight rating and a $ 120 price target, thought the company’s forecast was conservative as it did not include the expected launches of the “Diablo” and “Overwatch” franchises.
“Activision is looking for growth during the year for the Call of Duty franchise, despite a difficult comparison with the launch of Call of Duty Warzone on March 20, which was also strengthened by the stay-at-home regulations around CV -19,” said Kim. “Despite the high expectations, we still suspect a large dose of conservatism.”
Kim said he expects to hear more details from the company’s BlizzConline 2021 show starting Feb. 19.
Meanwhile, Cowen analyst Doug Creutz, who has a market valuation and a $ 100 price target, has expressed some skepticism about the company’s prediction of having two more franchises – probably “Diablo” and “Overwatch”, he says – which will contribute $ 1 billion in annual revenue. , in addition to “Call of Duty”, “World of Warcraft” and “Candy Crush.”
“It’s a pretty bold prediction, given the relative lack of such franchises in the market, and Blizzard’s clear recent battle outside of WoW,” Creutz said. “Nevertheless, we expect most investors to give management (at least for now) the benefit.”
Over the past 12 months, Activision shares have risen 73%, while the iShares Expanded Tech Software Sector ETF IGV,
grew by 48%, the S&P 500 index SPX,
increased by 17%, and the technologically heavy Nasdaq Composite Index COMP,
achieved 46%.
On Tuesday, shares of Electronic Arts Inc. EA,
closed off a record after the video game publisher reported quarterly results that did not meet Wall Street expectations. Take-Two Interactive Software Inc. TTWO,
will be expected to report its results after the markets close on Monday.
For their part, EA shares rose 1.9% to $ 141.22 on Friday, rising 31% over the past 12 months, while Take-Two shares rose 3% to $ 207.49 and the has increased by 72% over the past 12 months.