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Activision Shares Fall, as J.P. Morgan Downgrades to Neutral

J.P. Morgan acted after a report Tuesday that Activision CEO Bobby Kotick knew about sexual misconduct allegations before he originally claimed.
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Activision Blizzard  (ATVI) - Get Free Report shares fell Thursday, after J.P. Morgan downgraded the video game maker to neutral from overweight and cut its share price target to $88 from $100

J.P. Morgan analyst Alexia Quadrani acted after a Wall Street Journal report Tuesday that Activision CEO Bobby Kotick knew about sexual misconduct allegations at the company before he claimed.

The stock recently traded at $61.19, down 5%, and has plunged 34% in the last six months amid the scandal.

An Activision spokesperson disputed The Journal report, telling TheStreet Wednesday, "We are disappointed in the Wall Street Journal’s report, which presents a misleading view of Activision Blizzard and our CEO."

J.P. Morgan's Quadrani wrote in a commentary, “We are reluctant to downgrade after the stock has already underperformed … the S&P 500, and we still have longer-term conviction in its pipeline and brands,”

“Recent negative headlines introduce a significant amount of uncertainty into this story. The duration of this risk factor is also not know at this time, with additional negative headlines from partners like Sony SONY only adding more apprehension to this story.”

Sony’s PlayStation head Jim Ryan criticized Activision Wednesday for an inadequate reply to the allegations about Kotick.

“In a vacuum we still like the risk/reward, with the stock trading on a 15-trough multiple against this year’s guided earnings per share of $3.76,” Quadrani said.

“However, we don’t expect shares can outperform until there is clarity on this issue. We await more information on these matters to revisit our rating, particularly if the stock remains attractively valued against peers.”