Hilliard Lyons Downgrades Activision, Still Likes Long-Term Prospects

Hilliard Lyons has downgraded Activision Blizzard, Inc.

to Long-term Buy from Buy, saying that the recent share price appreciation had moved the stock close to its previous one-year target of $34 per share. "We feel ATVI's fundamentals, financial condition, and growth opportunities are positive investment factors, and that the valuation remains attractive despite the recent share price gains," analyst Jeffrey Thomison said in a client note. Thomison believes the videogame maker has a bright long-term outlook and investors could reap attractive total returns over a two-year investment time frame. "Not only is the portfolio of videogame franchises in excellent shape, in our view, the company is creating new revenue streams in high-growth areas such as mobile gaming and e-sports (competitive gaming)," Thomison noted. For 2016, the analyst sees non-GAAP EPS of $1.75 on revenue of $6.260 billion (including King Digital Entertainment). Wall Street analysts, on average, expect earnings of $1.79 a share on revenue of $6.29 billion. Thomison noted that ATVI's product pipeline is in good shape, including new iterations from powerhouse franchises such as Call of Duty and Destiny. Other important franchises from Blizzard include Starcraft, Diablo, Hearthstone, Heroes of the Storm, and, coming soon, Overwatch, the analyst added. Shares of Activision Blizzard were up about 2 percent at $33.89, while Thomison's new two-year price target is $40.