Video game publisher Activision Blizzard $ATVI was downgraded along with Electronic Arts $EA by Bank of America Merril Lynch with concerns about holiday sales. Despite expected strong sales of Call of Duty WWII the success of Fortnite concerns analysts.
Video game publisher Activision Blizzard $ATVI was downgraded along with Electronic Arts $EA by Bank of America Merril Lynch with concerns about holiday sales. Despite expected strong sales of Call of Duty WWII the success of Fortnite concerns analysts
After Electronic Arts lowered guidance with the delay of it’s flagship franchise Battleship V last week Bank of America Merrill Lynch responded the next day by downgrading $EA and Activision Blizzard as it gets the jitters over the video gaming industry’s holiday selling season.
Both stocks were lowered to neutral from buy, citing the crowded holiday slate and competition from “Fortnite.”
EA shares fell nearly 10 percent on Thursday after the company delayed its key “Battlefield V” game and lowered financial guidance for the year.
Bank of America analyst Justin Post note to clients Friday
– “More cautious as some key franchises continue to slump” –
Activision Blizzard shares fell 2.7% Friday, while EA shares fell 2.18% . The analyst lowered his price target for Activision Blizzard to $77 from $84. Post cited how “Fortnite” continues expand its user base on a monthly basis, which may negatively affect the large publishers’ game sales later this year. Increased competition in the first-person shooter game market, as shown by the “Battlefield V” issues, will likely pressure publishers’ high valuation multiples, he said.
Earnings of Activision Blizzard $ATVI increased sharply in the second quarter beating analysts’ expectations with record mobile revenues and net bookings. However the company issued below-consensus guidance for the third quarter and were down 3% after the release. At the same time the parent of studios with games such as Max Payne, Grand Theft Auto and NBA 2K18, rival Take-Two Interactive $TTWO shares lept over 7% aftermarket on upbeat earnings and bookings for Q1 2019. Post did not downgrade Take Two in his note.
Activision Blizzard shares are up 14.3 percent this year through Friday, while EA’s stock is up 8.2 percent. In the same time period, the S&P 500 is up 8.5 percent. Post is concerned a crowded fourth quarter “may lead to spillover challenges in early 2019 as publishers vie for gamer engagement to drive live service initiatives,” he said.
Source: ATVI, TradersCommunity,alphastreet