EA - Activision rebounds after UK related sell-off analysts digest strong Q1 results

2023-04-27 09:41:48 ET

Activision Blizzard ( NASDAQ: ATVI ) shares rebounded in early trading on Thursday after the U.K. blocked its Microsoft ( NASDAQ: MSFT ) deal as analysts praised the company's strong first-quarter results.

Benchmark analyst Mike Hickey reiterated the firm's buy rating on Activision ( ATVI ), noting that games like Diablo IV will "likely drive growth upside" due to strong pre-orders.

While Hickey said the company's decision to not pass through first-quarter upside to guidance was "somewhat disappointing," it is not inconsistent with how the company acted prior to the pandemic. Hickey also said Activision ( ATVI ) shares are trading at a discount to EA ( EA ), which is not consistent with history.

"We see considerable growth ahead over an exceptional balance sheet," Hickey wrote in an investor note.

Wedbush analyst Nick McKay maintained the firm's outperform rating and $95 per-share price target, noting that even without Microsoft ( MSFT ), the company is "well positioned" to grow double-digits year-over-year, as it expects net bookings to grow "at least" 30% year-over-year and operating income to grow at least 40%.

"With Diablo IV having strong presale numbers, continued strength in its Call of Duty franchise, and the introduction of Crash Team Rumble (and maybe Call of Duty: Warzone Mobile ) into the Q2 lineup, we see the potential for strong growth next quarter," McKay wrote in a note.

BMO Capital Markets analyst Gerrick Johnson said Activision ( ATVI ) has "upside" to $100 per share, implying potentially a 25% gain from current levels, as evidenced by the strong quarterly results and without Microsoft ( MSFT ) in the picture.

"We think these results highlight the success ATVI has had turning around its business and growing its core franchises, positioning it well as a (seemingly more likely) standalone entity," Johnson penned in the note.

Both companies have said they will appeal the U.K.'s ruling.

More on Activision

• Activision CEO says UK ruling on Microsoft `flawed in every respect'
• Activision tumbles as UK blocks Microsoft deal on competition concerns
• U.K. Throws A Wrench Into Microsoft-Activision Deal: Time To Reevaluate

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