Has Wall Street Gone a Bit Overboard Punishing Activision Blizzard (ATVI) Stock?

Activision Blizzard (ATVI) investors got cold feet today, sending shares tumbling nearly 10%.

Pressuring the stock? The gaming giant announced that it split away from its design and development partner Bungie, while releasing its rights to Destiny, once one of the most popular video games on the market. Bungie will assume full publishing rights and responsibilities for the Destiny franchise.

In reaction, Baird’s top analyst Colin Sebastian lowered his price target for ATVI stock from $75 to $69, while keeping his rating at Outperform.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Sebastian has a yearly average return of 21.4% and a 69% success rate. Sebastian has a 23% average return when recommending ATVI, and is ranked #17 out of 5142 analysts.

“While this will have an impact on revenues (2-3% of ATVI total) and earnings, we view this as a logical decision by Activision given the current state of the Destiny franchise, including negative revenue trajectory and our assumption that significant costs would be required to fund the next full sequel. We note Activision is not shy to end development on titles it deems to be falling short of financial expectations – e.g., Tony Hawk, Spider-Man, Guitar Hero, Wolfenstein, Quake, X-men, Transformers, etc,” the analyst added.

Wall Street agrees with Sebastian that this game producer giant is one to watch, as TipRanks analytics exhibit ATVI as a Strong Buy. Out of 21 analysts polled in the last 3 months, 16 are bullish on Activision stock while 5 remain sidelined. With a return potential of over 50%, the stock’s consensus target price stands at $71.33. (See ATVI’s price targets and analyst ratings on TipRanks)


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