Activision Blizzard Has Been Investing In Content (And It's Been Paying Off)

• Activision Blizzard, Inc. ATVI shares have surged 60 percent year-to-date, and are trading close to the higher end of their 52-week range of $17.73 - $32.50.
• Cowen & Co’s Doug Creutz maintained an Outperform rating on the company, while raising the price target from $28 to $35.
• Creutz expects Activision's recent and upcoming games and the likely renewed strength from Call of Duty have set the stage for significant top-line growth over the next few years.

Analyst Doug Creutz said that both Hearthstone and Destiny launched major expansions last month, and appear to be performing extremely well.

While Hearthstone's Grand Tournament expansion resulted in franchise peak performance on the app store, the Destiny Taken King expansion drove record user levels. “We expect both games to be key drivers of upside in Q3,” Creutz mentioned.

Cowen & Co’s videogame Ordometer continues to suggest that “advance interest in Black Ops 3 is very strong.” A strong launch during the holiday season would result in franchise digital revenue growth in 2016.

Creutz commented, “We also believe that World of Warcraft and Skylanders could see franchise declines slow or halt in 2016, the former because of an accelerating expansion release schedule, and the latter due to the potential for the toys-to-life competitive environment to become less fierce.”

The company recently launched Heroes of the Storm and is set to introduce Overwatch. Creutz believes that both these titles could generate “multi-hundred million dollar annual revenue.”

The analyst added that Warcraft may become available to mobile devices “as a real-time strategy game at some point, and given the size of the overall category (the two top mobile games in the west are Clash of Clans and Game of War, both RTS titles) and the strength of the IP, we think it could be a billion dollar a year game.”

The EPS estimates for FY15 and FY16 have been raised from $1.34 to $1.39 and from $1.51 to $1.61, respectively.