What do action camera manufacturer GoPro Inc (NASDAQ:GPRO), and interactive gaming and entertainment company Activision Blizzard, Inc. (NASDAQ:ATVI) have in common? Not much, other than that investors are currently anticipating quarterly earnings from both companies. Additionally, both stocks received bullish outlooks today from Wedbush analyst Michael Pachter.
Pachter shed some light on GoPro as the company is expected to report first-quarter results on Thursday, May 5, after market close. The analyst reiterated an Outperform rating on the stock, with a 12-month price target of $13.00.
The analyst expects first quarter results to be fairly conservative, and provides estimates of revenue at $180 million, and EPS of $(0.52). Pachter’s forecast is higher than the revenue consensus of $169 million, and comes close to EPS consensus of $(0.60).
Pachter explains, “Although our estimate is at the high-end of the revenue range, a figure closer to the low-end is likely, as we noted spotty demand for the HERO4 Session and the decline of the HERO4 Black from the top of industry sales charts.” The analyst elaborates further, noting, “GoPro management made a strategic and execution error by not introducing a replacement for the HERO4 last holiday season.”
Expanding on Karma’s possible influence towards GoPro’s success, Pachter expects fiscal year 2016 revenue guidance to remain unchanged, if Karma launches on time. He further reasons “GoPro has an installed base of roughly 20 million devices, and we think it is likely that if Karma meets consumer expectations, GoPro can penetrate at least 1% of its installed base each quarter. That suggests to us sales of 150,000 – 200,000 Karmas each quarter, making FY:16 guidance achievable.”
Further, the analyst acknowledges the investor concern regarding the lack of information on the Karma merely two months prior to the expected release. However, Pachter settles this commenting “GoPro has a history of staying quiet about new products until days prior to launch.”
The analyst concludes with an optimistic note, mentioning, “Given its history of innovation, we are willing to give GoPro the benefit of the doubt for the time being, and see upside if the Karma drone and the HERO5s are well-received.”
According to TipRanks, Michael Pachter’s predictions succeeded 46% of the time, ultimately delivering a one-year average return per recommendation of (-4.6%). In the past three months, the average analyst recommendation consensus for GPRO is a Hold, with 27% of analysts bullish, 55% of analysts neutral, and 18% bearish. All recommendations amounted to a 12-month average price target of $11.71, marking a (-5.64%) downside from when shares last closed.
Activision Blizzard, Inc.
Activision Blizzard is expected to release first quarter of fiscal year 2016, ended March 31, on Thursday, May, 5 after market close. In light of this, Pachter weighed in on the stock, reiterating an Outperform rating with a 12-month price target of $40.00.
The analyst expects “a Q1 beat from Call of Duty strength and digital momentum.” Pachter notes his current estimates for ATVI are revenue of $805 million and EPS of $0.12, compared with consensus of $812 million and $0.12 respectively.
The analyst further mentions the influence of the company’s top games, mentioning, “We estimate contributions from King of $152 million, Heroes of the Storm of $40 million, and incremental Call of Duty bundle and digital units (1.2 million, factoring in domestic only) of $54 million, implying the bundle and digital revenue figure was $746 million after accounting for Ascendance, resulting in a combined figure of $891 million.”
Further, the analyst acknowledges the game King’s potential, explaining, “We believe Activision Blizzard could earn well in excess of $3.00 by 2018 if it optimizes King’s untapped advertising opportunity and unlocks deal synergies, suggesting its stock is significantly undervalued.”
Pachter proceeds to mention possible risks to ATVI, including changes to game release timing, greater than expected deterioration of the average selling price for game software, competition, changes in macroeconomic factors, and lower than expected consumer demand for video game hardware.
The analyst expects a “partial pass-through of quarterly upside” for the entire fiscal year, though he still claims fiscal year 2016 EPS will exceed $2.00. He elaborates further claiming, “EPS may exceed $2 from a strong reception for Overwatch and King deal synergies.” The analyst mentions he expects a sizeable beat from a full quarter of King, as well as new release of Overwatch.
According to TipRanks, Michael Pachter’s predictions fall in line with the Strong Buy consensus recommendation for ATVI. In the past three months, the average analyst recommendation consensus for ATVI is a Strong Buy, with 85% of analysts bullish, and 15% of analysts neutral. All recommendations amounted to a 12-month average price target of $36.36, marking a 6.78% upside from when shares last closed.