Benchmark Cautiously Optimistic on Activision Blizzard, Inc. (ATVI) Ahead of FQ3:16 Earnings

Benchmark analyst Mike Hickey is out with a research report on shares of Activision Blizzard, Inc. (NASDAQ:ATVI) ahead of third-quarter results to be released November 11th. Anticipating expectations to be topped, Hickey reiterates a Buy rating on ATVI with a $49.79 price target, which represents a 13% increase from where the stock is currently trading.

Hickey projects fiscal third-quarter of 2016 sales were $1,579 million, in comparison to ATVI guidance of $1,535 million and the Street’s forecast of $1,563 million. Additionally, Hickey anticipates adjusted EPS of $0.42, slightly above management guidance of $0.40 and mirroring consensus, who also expects $0.42. For fourth-quarter, Hickey expects sales of $,435 million, under consensus of $$2,474 million, with over $0.74 in adjusted EPS, below the Street’s projection of $0.79.

The analyst believes the video game maker will maintain its sales forecast of $6,475, slightly under Hickey’s forecast of $6,522 and the Street’s of $6,573 million. Hickey also expects ATVI will reiterate adjusted EPS of $1.90, mirroring the analyst’s estimate, but falling below the Street’s of $1.98.

The analyst asserts, “While we remain cautious toward the fiscal ’17 growth profile, provided the presumed lack of new releases from Blizzard; we are more optimistic for fiscal ’18 growth when both Blizzard and King could generate considerable growth. We suspect normalized earnings may become a more relevant near term valuation method as investors look to bridge a soft fiscal year.”

“We view the Company’s risk / reward as positive; we anticipate a more challenging valuation growth profile over a more competitive holiday sales environment, medium term growth concerns and a recent positive valuation reset (67% off 52 week low). We remain bullish on the current gen console market and suspect upcoming consoles launches as an incremental growth opportunity,” Hickey concludes.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Mike Hickey is ranked #262 out of 4,172 analysts. Hickey has a 70% success rate and gains 12.6% in his annual returns. When recommending ATVI, Hickey yields 33.6% in average profits on the stock.

TipRanks analytics indicate ATVI as a Strong Buy. Based on 15 analysts polled in the last 3 months, 12 rate a Buy on ATVI, while 3 maintain a Hold. The 12-month price target stands at $46.52, marking a 5% upside from where the shares last closed.

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