Story updated at 9:40 a.m. to reflect market activity.
Shares of Activision Blizzard gained 2.1% to $21.03 in morning trading.
The bank set a price target of $25 for the video game publisher. Bank of America-Merrill Lynch's analysts believe Activision can post better near-term earnings growth.
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Separately, TheStreet Ratings team rates ACTIVISION BLIZZARD INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate ACTIVISION BLIZZARD INC (ATVI) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, ATVI's share price has jumped by 37.67%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ATVI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- ATVI's debt-to-equity ratio of 0.71 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that ATVI's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.06 is high and demonstrates strong liquidity.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Software industry and the overall market on the basis of return on equity, ACTIVISION BLIZZARD INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for ACTIVISION BLIZZARD INC is rather high; currently it is at 56.92%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, ATVI's net profit margin of 11.39% is significantly lower than the industry average.
- ACTIVISION BLIZZARD INC's earnings per share declined by 29.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, ACTIVISION BLIZZARD INC reported lower earnings of $0.95 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $0.95).
- You can view the full analysis from the report here: ATVI Ratings Report