Michael Olson Top Analyst Piper Jaffray
Over a million Activision Blizzard, Inc. (NASDAQ:ATVI) players have already rushed to purchase the much-anticipated Destiny 2 video game. Glitches from the original Destiny have been fixed, the storyline has become more coherent, and while no hard data is available yet, the initial reaction has been “mostly positive.” Currently, the only issue consumers are having with the new game is the changes made to “shaders.”
Top analyst Michael Olson of Piper Jaffray believes, “Destiny 2 can generate revenue upside vs. the prior iteration (and current Street expectations).” Moreover, with the coming October launch of the PC version, the analyst sees the company making a play for Asia, opining: “We believe the PC version offers an opportunity to acquire new players overall, but particularly in Asia where the video game market skews heavily to PC. Another benefit of PC is those units are more profitable vs. console units, which require a licensing fee to the console makers.”
As such, the analyst is reiterating an Overweight rating on ATVI with a price target of $69.00 representing a 4% rise over current trading levels.
Looking ahead to the third quarter, management is setting EPS guidance of $0.45, below Olson’s prediction of $0.49 and the Street’s forecast of $0.47. Moreover, the ATVI team models third quarter revenue at $1.7 billion, up against the Street’s estimate of $1.74 billion and the analyst’s of $1.76 billion.
For fiscal year 2017, management sets EPS at $2.00, while Olson and consensus forecast $2.04 and $2.12, respectively. However, if the company can maintain its eight-year streak of beating its original revenue predictions by 7% and EPS forecast by 20%, EPS for fiscal year 2017 could reach $2.22. Concerning total revenue for fiscal year 2017, the analyst predicts $6.68 billion, compared to consensus of $6.77 billion and guidance of $6.58 billion.
On a final note, Olson comments on Activision’s participation in PJC Tech Select Conference earlier this week, coming away with the following thoughts: “1) Overwatch League shaping up well; Call of Duty and Hearthstone are most logical next eSports leagues; 2) rewarded video ads continue to be tested as primary way of monetizing the 98% of players who do not pay to play King games; and 3) Activision’s growing attach rate for expansion packs & micro-transactions has created a “synthetic subscription” for a portion of the company’s revenue, allowing ATVI to command a higher multiple.”
Michael Olson has a good TipRanks score with a 64% success rate and a high ranking of #69 out of 4,633 analysts. Olson realizes 17.7% in his annual returns. However, when recommending ATVI, the analyst posts gains of 39.4%.
Tipranks analytics reveal ATVI as a Strong Buy. Out of 17 analysts polled by TipRanks (in the past 3 months), 14 are bullish, while 3 are sidelined on Activision stock. The stock’s consensus price target stands at $70.79 representing a near 7% upside potential over current trading levels.