33% Upside For Activision Blizzard With Microsoft Deal, 26% Upside Without? 3 Analysts React To Q4 Earnings

Zinger Key Points
  • Activision Blizzard surpassed most expectations in the fourth quarter, a Raymond James analyst says.
  • "ATVI remains underappreciated as a potential standalone story," says Andrew Marok.

Video game company Activision Blizzard ATVI reported fourth-quarter financial results after the market close Monday. The company broke several records in the quarter thanks to its key franchises. Here’s what analysts are saying after the print. 

The Activision Blizzard Analysts: Benchmark analyst Mike Hickey has a Buy rating and $90 price target.

Oppenheimer analyst Martin Yang has no rating and no price target.

Raymond James analyst Andrew Marok has an Outperform rating and $95 price target.

Related Link: Trading Strategies For Activision Blizzard Stock Before And After Q4 Earnings

The Activision Blizzard Takeaways: Hickey highlights a strong back catalog for Activision Blizzard as it faces the uncertainty of a pending acquisition by Microsoft Corporation MSFT.

“Investors are reengaging on ATVI’s fundamental growth opportunity as growth accelerate and the MSFT deal has become increasingly uncertain as regulatory wrestling may exhaust motivation,” the analyst said. 

The market is pricing in a 9% probability the Microsoft deal goes through based on the pre-bid price of $69, he said. 

“We think investors will either be rewarded with an approximate 33% upside to MSFT’s $95 bid or an approximate 26% upside to our FY23 $90 price target if the deal is blocked.”

Macroeconomic pressure could hurt Activision Blizzard’s growth from mobile games and video games, Hickey said. 

“We believe the relative size and strength of ATVI’s game franchises should insulate them from the immediate consumer impact we are witnessing from their competitors’ games, but we recently became incremental more conservative on FY23 net bookings and profit growth.”

The Call of Duty franchise was highlighted by Activision Blizzard and was a highlight for Oppenheimer's Yang.

“Success of CoD MW2 and performance optimization benefited CoD Mobile, resulting in new record quarterly bookings after it last peaked in 3Q21,” the analyst said. 

The company’s King segment, which includes mobile games like “Candy Crush,” saw record bookings and “defied industry headwinds,” he said. 

One potential negative for the company is the loss of China sales due to an expired license agreement with NetEase NTES, Yang said. 

“We continue to be impressed by the density and quality of its premium content. ATVI stands out among AAA publishers.”

Marok said Activision was not as affected by the weak macroeconomic environment as other video game companies, which could support a "big get bigger" thesis of engagement.

“Each segment outperformed our above-consensus view, which we see as an encouraging sign, not solely relying on Call of Duty to carry the quarter,” the analyst said.

The expectations were elevated for the fourth quarter, which included several large game releases, and the company surpassed most analysts’ expectations, he said. 

“While regulatory reviews related to the proposed MSFT acquisition continue to dominate the narrative around the stock, we see 4Q results as a clearly positive indicator toward our thesis that ATVI remains underappreciated as a potential standalone story.”

ATVI Price Action: Activision shares are up 5% to $74.67 on Tuesday versus a 52-week range of $70.94 to $82.

Read Next: Was Buying Activision Blikzzard Stock A Call Of Aribtrage Duty For A Congressman Or Will He Play Overwatch With Regulators 

Photo via Shutterstock. 

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Posted In: Analyst ColorEarningsGamingNewsPrice TargetReiterationTop StoriesAnalyst RatingsMoversTrading IdeasGeneralAndrew MarokBenchmarkCall of DutyCandy CrushExpert IdeasMartin YangMike HickeyOppenheimerRaymond JamesVideo Game Companiesvideo games
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