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What Analysts Are Saying About Activision Blizzard and EA After Earnings

Chris Lange

Published: May 6, 2020 12:48 pm

Activision Blizzard Inc. (NASDAQ: ATVI) and Electronic Arts Inc. (NASDAQ: EA) each reported their most recent quarterly results after the markets closed on Tuesday. As the coronavirus pandemic has forced many to stay at home, these staples of the video game industry have pushed toward all-time highs, while more people turn to video games for entertainment.

24/7 Wall St. has included some brief highlights from each of the reports as well as what analysts are saying after the fact.

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Activision Blizzard

For the first quarter, the company reported $0.76 in earnings per share (EPS) and $1.52 billion in revenue. Analysts were calling for $0.38 in EPS and revenue of $1.32 billion. The same period of last year reportedly had EPS of $0.31 on $1.26 billion in revenue.

Wedbush reiterated an Outperform rating and raised its price target to $84 from $76. The firm noted that Activision crushed guidance and expectations, driven by accelerated Call of Duty strength and broad-based engagement gains against the backdrop of shelter-in-place restrictions. Wedbush further detailed in its report:

Revenue was $1,522 million, compared with our estimate of $1,280 million, consensus of $1,321 million, and guidance of $1,275 million. Top-line outperformance was driven primarily by continued strength from Call of Duty: Modern Warfare (released October 25) that was accelerated by the release of Call of Duty: Warzone, on March 10, and further benefitted from higher demand associated with stay-at-home guidelines. Management also cited broad strength from the company’s Blizzard segment, highlighting continued growth in World of Warcraft’s active player community (following growth of roughly 100% in 2H:19), and improved engagement across both Hearthstone and Overwatch. King revenue benefitted from yet another quarter of Candy Crush performance at the top of the app charts, and as shelter-at-home conditions accelerated MAU growth to double-digits in March. EPS was $0.58, compared with our estimate of $0.35, consensus of $0.38, and guidance of $0.35. Earnings upside was driven primarily by the revenue outperformance relative to guidance and expectations, although operating expenses were also modestly below our prior estimate

Here’s what a few other analysts had to say:

• Needham reiterated a Buy rating with a $75 price target.
• Morgan Stanley reiterated it as Overweight with a $76 price target.
• BofA Securities reiterated a Buy rating with an $80 target price.
• Credit Suisse reiterated it as Outperform with an $83 price target.
• UBS reiterated a Buy rating and has an $84 price target.

Activision Blizzard stock traded up about 5% to $72.19 on Tuesday, in a 52-week range of $41.84 to $74.79. The consensus price target is $69.71.

Electronic Arts

This firm reported that it had $1.43 in EPS and $1.39 billion in revenue. Analysts had forecast $0.98 in EPS on $1.19 billion in revenue for the first quarter. The prior quarter reportedly had $0.69 in EPS and $1.24 billion in revenue.

Wedbush reiterated an Outperform rating and raised its price target to $145 from $135. Ultimately, the firm expects growth in the foreseeable future driven by cost discipline, digital sales growth and several key evergreen franchises. It further detailed in its report:

Net bookings were $1,213 million, vs. our estimate of $1,160 million, consensus of $1,186 million, and guidance of $1,152 million. Upside relative to guidance and expectations was driven by outsized live services revenue and rising usage and engagement levels observed across many of EA’s titles in association with stay-athome guidelines and restrictions. The Sims 4 and Apex Legends were specifically cited as contributing to digital net bookings above prior expectations. EPS was $1.08, vs. our estimate of $0.95, consensus of $0.98, and guidance of $0.93.

The company introduced FY:21 guidance for net bookings and EPS of $5,550 million and $4.90, representing growth of 5.5% and 2.0% from the actual FY:20 figures of $5,211 million and $4.81. We previously modeled net bookings and EPS of $5,250 million and $4.90, with prior consensus at $5,370 million and $4.96. Investors appeared to expect a more dramatic guide, given that competitor Activision raised its own guidance yesterday.

A few other analysts weighed in on EA as well:

• Oppenheimer reiterated a Buy rating with a $125 price target.
• Robert Baird reiterated an Outperform rating with a $130 price target.
• BofA Securities reiterated its Neutral rating with a $122 price target.
• Credit Suisse reiterated it as Outperform with a $133 target price.
• JPMorgan reiterated an Overweight rating with a $127 price target.

Electronic Arts stock was down nearly 5%, at $113.96 in a 52-week range of $85.69 to $120.19. The consensus price target is $120.00.

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