Deutsche Bank upgrades Activision Blizzard, cuts EA on varying strategies
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Investment firm Deutsche Bank upgraded Activision Blizzard (NASDAQ:ATVI) and downgraded Electronic Arts (NASDAQ:EA) on Thursday, citing to varying strategies between the video game makers.
Analyst Benjamin Soff raised his rating on Activision (ATVI) to buy from hold and increased the per-share price target to $90, noting the company has the "highest concentration" of must-have content, including its popular Call of Duty franchise.
"December quarter results for the major US video game publishers demonstrated that, across the industry, consumer spending patterns are getting weaker overall, and users are increasingly gravitating towards the biggest franchises and the most well known IP (at the expense of smaller, more casual titles)," Soff wrote in a note to clients, adding that Activision (ATVI) saw "robust" growth during its most recent quarter.
Led by CEO Bobby Kotick, Activision (ATVI) is currently in the process of being acquired by Microsoft (MSFT) but the deal has seen regulatory pushback around the world.
Activision (ATVI) shares rose fractionally in premarket trading.
Conversely, Soff lowered his rating on EA (EA) to hold from buy, noting that the company's outlook is being hit by the broader global economic weakness, as well as a "reset" of its mobile strategy and fewer new titles than anticipated.
"Compared to our prior expectations, we are now forecasting lower levels of growth in [fiscal 2023 to fiscal 2025] (3.7% CAGR vs 5.6% prior), and we believe the stock is fairly valued based on this new lower growth outlook," Soff wrote.
EA (EA) shares fell 1.2% in premarket trading on Thursday.
Earlier this week, it was reported that Activision (ATVI) may have hired Morgan Stanley for activism defense amid its ongoing saga to be acquired.
Analysts are largely bullish on Activision Blizzard (ATVI). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates ATVI a HOLD.