Wells Fargo Hypes Up Activision Blizzard Into 1Q20 Earnings


Activision Blizzard (ATVI) is scheduled to report 1Q20 earnings today after-market. Going into earnings, Wells Fargo analyst Brian Fitzgerald has high hopes for ATVI stock- which he says he prefers along with Take-Two (TTWO) over video-game rivals Electronic Arts (EA), Zynga (ZNGA) and Ubisoft Entertainment.

He is forecasting Net Bookings/Non-GAAP Operating Income of $1.35B/$370MM vs. the Street at $1.32B/$368MM. “Year to date, ATVI stock is up 12% (vs. -3% for the Nasdaq Composite), and near the highs of the year with consensus estimates unchanged since the start of the COVID-19 pandemic” the analyst points out.

Encouragingly, Fitzgerald notes that ATVI has not pulled FY20 Net Bookings guidance (+5% year-over-year).

In particular ATVI’s release of FTP Battle Royale formatted Call of Duty: Warzone (50MM+ players reached one month after release, one of the fastest-growing FTP titles) is tracking well, says Fitzgerald. He is now looking for signs that Call of Duty Mobile’s strong performance out of the gate has staying power.

However, the analyst also cautions that the outlook for ATVI’s King unit may change due to the impact of Covid-19 on mobile engagement.

We model King Segment Revenues up mid-single digits, but acknowledge the possibility that King could reduce guidance… Work from home, social distancing, and other responses to the COVID-19 pandemic have eliminated the ‘waiting times’ for hundreds of millions of consumer worldwide, likely reducing the number of hours spend playing Candy Crush” he says.

With a $75 price target, Fitzgerald sees 12% upside potential for ATVI stock. This falls just above the Street’s average price target of $69. Nonetheless the majority of the Street shares Fitzgerald’s bullish outlook- giving Activision a Strong Buy analyst consensus. (See Activision Blizzard stock analysis on TipRanks)

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