Activision Blizzard Inc. shares closed on Friday at their highest price since 1984, or at an all-time high if you factor in several stock splits, following strong earnings and an outlook looking to tap into more of the fast-growing mobile gambling market.
Activision Blizzard ATVI,
Shares were up more than 12% during the day on Friday, closing 9.6% at $ 101.61. That’s the first time Activision’s stock price has moved above $ 100 since January 20, 1984, when the stock closed at $ 103.12, according to data from FactSet. But good for the nine stock splits since then, shares ended at a record high of $ 78.53 billion, according to FactSet.
At the end of Thursday, Activision Blizzard reported quarterly results and outlook surpassing Wall Street expectations, along with plans to expand more of its franchises to mobile. The company publishes the popular “Call of Duty” franchise under the Activision brand, its “World of Warcraft” franchise under the Blizzard brand, along with its “Overwatch” and “Diablo” franchises, and “Candy Crush” under the King brand. Activision acquired Blizzard in 2008, through the merger with Vivendi’s gaming business, and King Digital Entertainment in 2016.
In recent years, mobile gaming has become the fastest growing platform in the video game industry, accounting for about half of its approximately $ 180 billion in 2020 sales, with PC and console games making up the other half, according to IDC data.
Of the 34 analysts covering Activision Blizzard, 28 have a buy ratio for the stock, five have a hold rating and one has a sell rating, according to FactSet. Of these, 20 increased their price targets, raising the average price target for the stock from $ 92.68 to $ 108.86, according to data from FactSet.
JPMorgan analyst Alexia Quadrani, who has an overweight rating on the stock and has raised her price target from $ 101 to $ 115, expects the “Call of Duty” franchise to set the example for the company’s other titles.
Not only does ‘Call of Duty’ go the traditional route of console and PC sales with its ‘Black Ops – Cold War’ and ‘Modern Warfare’ titles, but the franchise also features a free-to-play ‘Warzone’ battle royale. option similar to Epic Games Inc.’s “Fortnite”, with all of these options available on a mobile platform.
“The success at CoD in 2020 significantly exceeded expectations at the beginning of the year (even adjusted for the pandemic), and we expect ATVI to apply similar business model innovation to other titles, using mobile to expand reach and free-to-use. -play modes. to drive the conversion of players to premium games, ”said Quadrani.
Stifel analyst Drew Crum, who has a buy rating and has a $ 108 price target on the stock, remained positive about the possible developments at the company, even though he found the results mixed.
“We think this is (however) being overtaken by management’s (positive) comments on ’21 (and beyond), which provided more context around the timing of major initiatives, and what appears to be happening for a potentially huge year in ” 22, ”said Crum.
Raymond James analyst Andrew Moroccan, who has an outperform rating and has raised his price target from $ 109 to $ 120, said he still thinks the company “has enough runway to reach new players through mobile and free-to-play offers. and capitalize on strong demand for planned new titles in existing franchises. “
UBS analyst Eric Sheridan, who has a buy rating and has raised his price target from $ 116 to $ 120, said Activision Blizzard stayed true to the theme of the past 12 months.
The company’s earnings report “showed how the broader industry has benefited from the ‘stay-at-home’ momentum while remaining focused on the [long term], ‘Said Sheridan.
“In the latter case, the industry is poised to become a net participant in media consumption, taking advantage of a blurring of platform and gameplay preference rules by maintaining a global base (increasingly mobile) and continuing to allocate capital to a mix of growth and shareholders, ”said the UBS analyst.
Wells Fargo analyst Brian Fitzgerald, who is overweight and has a $ 120 price target, asked in a note, “How big and profitable can this thing get?”
Last year, Activision Blizzard outlined four pillars of its long-term strategic growth: more new releases, enhancing live operations, expanding popular PC and console games to mobile platforms, and adding “ new engagement models, ” such as branching into the city leagues and esports.
Fitzgerald said management “was clear they expect a ‘step change’ in financial performance in FY22, and we have no reason to doubt their ability to execute the four-pillar growth strategy for franchises other than ‘Call of’. Duty ‘. “
Piper Sandler analyst Yung Kim, who has an overweight rating and a price target of $ 120, thought the company’s prediction was conservative, as the expected launches of the “Diablo” and “Overwatch” franchises were not included.
Activision is looking for full-year growth for the Call of Duty franchise, despite a difficult comparison to the March 20 launch of Call of Duty Warzone, which was also boosted by the emergence of stay-at-home rules around CV-19 , ‘said Kim. “Despite the high expectations, we continue to suspect a good dose of conservatism.”
Kim said he expects to hear more details from the company’s BlizzConline 2021 show starting February 19.
Meanwhile, Cowen analyst Doug Creutz, who has a market performance and a $ 100 price target, expressed some skepticism about the company’s prediction that there will be two more franchises – likely ‘Diablo’ and ‘Overwatch’, he says – which are $ 1. billion in annual revenue, in addition to “Call of Duty,” “World of Warcraft,” and “Candy Crush.”
“This is a pretty bold prediction, given the relative lack of such franchises in the marketplace and Blizzard’s apparent recent battle alongside WoW,” said Creutz. “Nevertheless, we expect most investors to give management the benefit of the doubt (at least for now).”
In the past 12 months, Activision shares have gained 73%, while the iShares Expanded Tech-Software Sector ETF IGV,
has grown by 48%, the S&P 500 index SPX,
is up 17%, and the tech-heavy Nasdaq Composite Index COMP,
46% won.
On Tuesday, shares of Electronic Arts Inc. EA,
pulled back from a record high after the video game publisher reported quarterly results that fell short of Wall Street expectations. Take-Two Interactive Software Inc. TTWO,
is scheduled to release its results after markets close on Monday.
EA shares for their part closed 1.9% on Friday at $ 141.22, and are up 31% over the past 12 months, while Take-Two shares closed 3% at $ 207.49 and are up 72% in the past 12 months.