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Michael Pachter, Timothy O & # 39; Shea says Activision-Blizzard is a purchase



Activision-Blizzard just missed Wall Street expectations, warned of disappointing results this year, and announced it would dismiss 800 employees to cut costs.

But if you ask some of the analysts covering the company, Activision has positioned itself for a remarkable rebound next year.

The company's outlook for 2019, as it announced as part of the fourth quarter income statement, probably underscores that the parent company and its Blizzard unit will actually perform, Wedbush's Michael Pachter said in a research note Wednesday. And the company has stated 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 guide "leaves a significant space for upside," Pachter said in his report. He continued: "We do not accept that the calamitous fall in Blizzard revenue proposed by the company's guidance will be as serious as projected."

Pachter repeated his outperform ratings on Activision's stock, but reduced his price target to $ 56 per. Stocks from $ 64. Shea confirmed both his purchase rate and his $ 60 price.

Activision's stock closed regular trading on Wednesday $ 2.90 or 7% to $ 44.57.

Read this: Activision-Blizzard, the largest video game company behind & # 39; Call of Duty & # 39; and & # 39; Overwatch & # 39; located about 800 employees

Blizzard won't make it as bad as Activision predicts [1
9659010] Blizzard's revenue is likely to fall this year last year due to a decline in game purchases and a decline in new game sales thanks to an easy release plan, Pachter says. But while the company's guidance implies that Blizzard's sales will fall by about $ 650 million this year, he expects them to fall by $ 540 million.

However, Pachter believes that Blizzard King's mobile gaming device will grow faster than Activision's guidance suggests. King's sales will jump about $ 315 million this year, boosted by rising advertising sales, he estimated.

Combined, he believes that Activision will earn an adjusted $ 2.25 share in profits this year on sales of $ 6.7bn. both of these figures include the company's deferred income and the level of earnings excludes certain expenses. Although these figures are sharply down from Pachters previous projections, they are significantly above the company's own guidance in 2019. On a customized basis, Activision expects $ 2.10 for revenue from revenue of $ 6.3bn.

"We think our new estimates are very conservative and believe that as we look back in 2019, we will find that Activision delivered earnings closer to $ 2.50 than to $ 2.10," he said.

It probably has its own free-to-play games in the works

But the company could do a lot better than that. Activision's guidance prospects include little benefit from its mobile games, but it has two new ones that could start in the middle of the year, Pachter says. Activision has been harmed by the popularity of free-to-play games from other publishers, especially Epic Games & # 39; Fortnite & # 39; and Electronic Arts & # 39; new & # 39; Apex Legends & # 39; But it can get a boost if it launches a free version of its "Overwatch" game and a standalone free version of Blackout Battle Royal Mode found in Call of Duty: Black Ops 4, he said.

Epic Games

"We think Activision can recover part of the market share expected for" Apex Legends ". & # 39; and already caught by & # 39; Fortnite & # 39 ;, said Pachter. 19659002] Shea predicts that Activision will launch free-to-play versions of "Overwatch" and Blackout, but he found reasons for optimism about the business elsewhere.

Activision's outlook for 2019 was not As bad as investors feared, especially since Blizzard does not plan for a major release this year, Shea said, it seems that Blizzard pushed back a game from this year to next, and it could solve two top games in 2020, he said.

"In 2019, a transitional year 2020 looks like the payout," said O & # 39; Shea. He continued: "Playlists are rarely seen positively, but it is a very different situation than a company in structural decline. "


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