'Overwatch' Success Is A New Tentpole For Activision Blizzard

Activision Blizzard, Inc. ATVI reported robust Q2 results, while raising its 2016 guidance.

Baird’s Colin Sebastian reiterated an Outperform rating on the company, while raising the price target to $46.

Robust Results

Sebastian mentioned that the strong Q2 results were driven by the successful launch of "Overwatch" and ongoing digital momentum.

Activision reported its 2Q non-GAAP revenue and EPS well ahead of the consensus expectations, driven largely by the 219 percent digital revenue growth.

Related Link: Activision Blizzard's Gaming Success Beats Top And Bottom Line

“King indicated that Candy Crush franchise revenues grew Q/Q and Y/Y, with no discernible impact to-date from Pokemon Go,” Sebastian stated.

Guidance Raised

Management raised its 2016 non-GAAP revenue and EPS guidance from of $6.275 billion and $1.78 to $6.475 billion and $1.90, respectively, “providing some additional cushion as Call of Duty pre-orders are tracking below last year.”

The 3Q15 non-GAAP revenue and EPS guidance is well ahead of the consensus, despite Activision usually issuing a conservative guidance and the robust pre-order trends for the expansion pack of "World of Warcraft Legion."

“Key drivers remain positive, including console installed base, mobile usage, in-game monetization and Digital mix shift. Activision Blizzard now has 491M MAUs across its network,” Sebastian said.

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