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Ascendiant Capital Markets: Activision Blizzard Shares Attractive Ahead Of Earnings

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Analysts at Ascendiant Capital Markets believe that shares of Activision Blizzard (NASDAQ: ATVI) are attractive going into the company's second quarter results.

The analyst, Edward Woo, is expecting Activision Blizzard to report an inline quarterly report when the company releases its earnings on Tuesday after market close. The analyst is expecting Activision Blizzard to earn $0.02 per share, while revenue of $641 million will top the consensus estimate of $608 million.

Woo notes that NPD data suggests that Activision Blizzard has benefited from the improving overall gaming industry. The NPD Group reported that U.S. video game software sales in the quarter were up nine percent.

Woo projects that Activision Blizzard's strong lineup of new games including The Amazing Spider-Man 2 and TRANSFORMERS: Rise of the Dark Spark will help the company deliver positive comps compared to last year's second quarter.

Activison Blizzard also entered the second quarter with lots of momentum from its large first quarter upside, which benefited from strong sales of its newly released Diablo III: Reaper of Souls. In the first quarter, the company also had record digital sales, which accounted for 68 percent of revenue contributing to a record operating margin of 31 percent and a record first quarter earnings per share of $0.19.

Finally, Woo notes that Activision Blizzard's recent completion of its shares buyback from Vivendi will be accretive to the company's earnings per share. The analyst believes that the deal will increase pro forma EPS by 23 percent to 33 percent.

Looking beyond the quarter, Woo is bullish on Activision Blizzard's full year prospect given its lineup of new game releases including Bungie's Destiny due in September, a new Call of Duty release in November, Skylanders in October and a WOW expansion pack in December.

Woo is projecting Activision Blizzard to earn $1.30 per share in fiscal 2014 on $2.408 billion of revenue. In fiscal 2015 the analyst expects the company to earn $1.40 per share on $4.725 billion of revenue.

Woo maintains a Buy rating on Activision Blizzard with a price target raised to $26 from a previous $24.

Latest Ratings for ATVI

Dec 2017BTIG ResearchInitiates Coverage OnBuy
Dec 2017Goldman SachsUpgradesNeutralBuy
Nov 2017Hilliard LyonsUpgradesUnderperformNeutral

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