Any time you see video games, whether free on a mobile download, or the expensive console variety being advertised during expensive broadcast television and cable programming like sports, you know the industry is charging full speed ahead. This year is no different, and with the holiday shopping season in full-swing, you can bet the companies with the hot titles stand to have a huge fourth quarter.
In a new research report from Cowen, their analyst Doug Creutz, who is one of the best on the street in the space, presents the firm’s Black Friday ordometer results. The ordometer analysis is based on Amazon best-seller data and uses a complicated process to help determine pre-order and post launch sales. With hot new releases out in time for the holidays, the Cowen team crunched a ton of numbers.
Three companies are huge in the sector, and all three are rated Outperform at Cowen.
This company reported outstanding third-quarter earnings, made a huge acquisition and is the top pick at Cowen. Activision Blizzard Inc. (NASDAQ: ATVI) develops and publishes online, personal computer (PC), video game console, handheld, mobile and tablet games worldwide. The company develops and publishes interactive entertainment software products through retail channels or digital downloads; and downloadable content to a range of gamers.
The company’s Call of Duty franchise, which has propelled earnings for this industry powerhouse for years, came out just in time for the holidays with Call of Duty: Black Ops 3, which showed up as one of the top-selling games over the three-day Black Friday period.
The big news recently was the company’s purchase of Candy Crush saga creator King Digital Entertainment. The Cowen team, and most of Wall Street, thinks the buy is an outstanding move for the company, and specifically the synergies between the two companies is cited. Many analysts feel that the key to unlocking some monster value is creating and cross-promoting the Activision product inside the King Digital mobile distribution network.
Some on Wall Street feel the guidance the company gave when it reported is very conservative. They also think the content Activision will release in the rest of 2015 is outstanding and not fully reflected in the guidance. The growth in the quarter was particularly impressive given two challenges: the strong dollar and unfavorable comparisons to the prior year quarter, which were lifted by strong sales of The Amazing Spider-Man 2. Much of that growth was fueled by Destiny, Heroes of the Storm and Hearthstone, which now have 70 million registered players combined. The three titles have generated over $1.25 billion in non-GAAP revenues to date.
Activision investors receive a 0.6% dividend. The Cowen price target for the stock is $44. The Thomson/First Call consensus target is $41.46. The stock closed Tuesday at $38.57.
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