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Activision Blizzard Gets Positive Wall Street Reviews Despite Guidance

Shares of Activision Blizzard, the video game maker, are lower on what some analysts think is conservative guidance.
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Analysts remained mostly positive on Activision Blizzard  (ATVI) - Get Activision Blizzard, Inc. Report Friday, even though the video game maker offered disappointing guidance after beating Wall Street's third-quarter expectations.

Shares of the Santa Monica, Calif.-based company were off 2.4% to $75.19 in trading Friday.

Activision Blizzard, whose franchises include "Call of Duty," "World of Warcraft" and "Candy Crush," reported adjusted earnings of 71 cents a share on net bookings of $1.77 billion in the September quarter. Analysts expected earnings of 65 cents a share on sales of $1.69 billion.

The company raised its full-year adjusted revenue forecast to $8.1 billion from $7.63 billion. Analysts had expected adjusted sales of $7.94 billion, according to IBES data from Refinitiv.

Piper Sandler Yung Kim said in an investors note the guidance incorporates caution around an unpredictable macro environment. 

However, he said, "we also suspect a heavy dose of conservatism,” given the implication for a year-over-year decline in earnings per share and flat revenue for the fourth quarter despite a 'World of Warcraft' expansion on Nov. 23, a new 'Call of Duty' on Nov. 13 and “incremental” Warzone.

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Kim rates the stock overweight, and raised the price target to $100 from $98 a share.

Activision Blizzard has done well during the coronavirus pandemic as consumers stay in their homes.

Kim said management anticipates growth through 2021, which is “a significant positive” considering the difficult comparison with 2020 after it was lifted by Covid-19.

Jefferies analyst Alexander Giaimo, who has a buy rating on the stock with a $105 price target, said the third-quarter earnings were ahead of Wall Street projections but below “bullish investor expectations."

The analyst added that the third-quarter "looked more like a traditional ATVI beat rather than a Covid beat, as we are beginning to see gaming momentum subside a bit from peak Covid trends."

Benchmark analyst Mike Hickey raised his price target on the stock to $109 from $102, while keeping a buy rating on the shares. 

He said management was "constructive" on the opportunity for fiscal year 2021 growth from its "Call of Duty," "World of Warcraft" and "Candy Crush" franchises.