Cowen said Activision Blizzard, Inc. ATVI remains its favorite idea, as the firm still expects the video game maker to finish the year north of $2 in EPS, even including FX impact.
"We are raising our PF FY16 estimate (which treats King [Digital] as if it had been acquired on January 1, worth +$0.09 vs. reported numbers) from $1.88 to $1.92," analyst Doug Creutz wrote in a note.
The analyst has raised his second quarter EPS view to $0.45 from $0.39 versus consensus estimate of $0.41. However, Creutz said Activision's reported second-quarter could top his updated estimates.
eSports, Check In On 'Overwatch'
Creutz, who rates Activision Outperform, said the company has the most exciting longer-term opportunities in the peer group, including adding ads into King's games and advertising/licensing opportunities in eSports.
On the gaming front, Activision said "Overwatch" had already passed 10 million players.
Creutz further noted that the game has been a success globally, notably in Korea where it replaced "League of Legends" as the most-played game in Internet cafes.
"The success helps Activision in several ways: (1) immediately with Q2 upside, (2) sets up the potential for meaningful downstream digital revenues, and (3) adds another potentially major esports title to the company's arsenal," Creutz highlighted.
The analyst raised his second-quarter sell-in estimate for "Overwatch" to 7.5 million units from 4 million units. In fact, the analyst thinks his latest estimate "will probably prove conservative."
Brexit And The U.K.
On the flip side, Creutz said the Brexit will hit the company's second half of 2016 results as the U.K. is expected to account for about 13 percent of total company revenue.
"While King helps with some cost offset in the UK, we think margins will still be affected by the lost revenue. We are building in a $0.02 impact in 2H:F16 and $0.05 in FY17," the analyst elaborated.
That said, based on its weekly tracking of King's game performance, Cowen believes King would report roughly flat mobile revenue in the second quarter versus first quarter.
At the time of writing, shares of Activision was up 3.845 percent on the day, trading at $39.48. Creutz has a price target of $44 on the stock.
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