Michael Pachter, Timothy O & # 39; Shea says Activision-Blizzard is a purchase
Activision-Blizzard just missed Wall Street expectations, warned of disappointing results coming this year, and announced that it will put 800 employees down to cut costs.
But if you ask any of the analysts covering the company, Activision has positioned itself for a remarkable recovery next year.
The company's outlook for 2019, as announced as part of the fourth quarter performance report, is likely to undercut how the overall company and its Blizzard unit will actually perform, Wedbush's Michael Pachter said in a survey Wednesday. And the company has indicated that it has a strong pipeline of games that will increase its 2020 performance, said Jefferies' Timothy O & # 39; Shea's own note Wednesday.
Activision's guidance "leaves a significant room upwards," Pachter said in his report. He continued: "We do not accept that the calamitous decline in Blizzard revenue suggested by the company's guidance will be as serious as projected."
Pachter marked his excellent rating on Activision's stock, but reduced his price target to $ 56 per share from $ 64. Shea confirmed both his purchase valuation and his $ 60 pricing target.
Activision's stock closed regular trading Wednesday up $ 2.90, or 7%, to $ 44.57.
Read this: Activision-Blizzard, the largest video game company behind Call of Duty and Overwatch, is around 800 employees
Blizzard won't do as badly as Activision expects [1[ads1]9659010] Blizzard's revenues are likely to fall this year from last because of a decline in game purchases and a decline in new game sales, thanks to a lightweight release plan, Pachter said. But while the company's guidance implies that Blizzard's sales will fall by around $ 650 million this year, it assumes they will fall by $ 540 million.
However, Pachter believes that Blizzard's King mobile game device will grow faster than Activision's guidance suggests. Kings sales will jump around $ 315 million this year, boosted by increasing advertising sales, he estimated.
Combined, he believes Activision will earn a regulated $ 2.25 per share in profits this year on sales of $ 6.7 billion; both figures include the company's deferred income and the income figure excludes certain expenses. Although these figures are sharply down from Pachters previous forecasts, they are significantly above the company's own guidance for 2019. On an adjusted basis, Activision forecasts $ 2.10 a share in revenue of $ 6.3 billion.
"We believe our new estimates are very conservative and believe that as we look back in 2019, we will find that Activision delivered revenues closer to $ 2.50 than to $ 2.10," he said.
It probably has their own free-game games in the works
But the company could do much better than that. Activision's guidance view includes little benefit from the mobile games, but it has two new ones that can start in the middle of the year, Pachter said. Activision has been harmed by the popularity of free game games from other publishers, especially Epic Games & # 39; Fortnite & Electronic Arts & # 39; new "Apex Legends." But it can be a boost if it launches a free version of its Overwatch game and a standalone free version of the Blackout match Royal Mode found in the Call of Duty: Black Ops 4, he said.
"We believe that Activision can resume part of the market share expected for" Apex Legends ". & # 39; and already captured by & # 39; Fortnite & # 39 ;, said Pachter.
O & # 39; Shea also predicts that Activision will launch free-to-play versions of "Overwatch" and Blackout, but he found reasons for optimism about the company elsewhere.
Activision's 2019 views were not as bad as investors feared, especially given that Blizzard is not planning a major release this year, said Shea, in fact, it seems that Blizzard pushed back a game from this year to next year and it could trigger two top games by 2020, he said
"By 2019, a transition year looks like the payout 2020," Shea said, continuing: "Game boards are rarely seen positive, but it's a completely different situation than a structural downturn." [19659020]
