Replies to post #781 on Activision Blizzard Inc (ATVI)

[FUNMAN]

Activision Blizzard a top pick at Morgan Stanley, seeing 46% upside • 10:42 AM

Activision Blizzard (ATVI +1.1%) has made the list of Morgan Stanley's top ideas (the top ideas that are non-FANG, at any rate) and the firm says they're "aggressive buyers" pursuing at least 45% upside.

Up front the firm takes on the game slate debate: "Is the Blizzard Diablo and Overwatch pipeline intact and still coming in '22/'23? We think it is," pointing to strong development teams at Blizzard (despite some high-profile departures) and the company's recent talk about a "very significant 18-month period for content releases" there.

That increases Morgan Stanley's confidence that either Diablo IV or Overwatch 2 are coming next year. "With Diablo II: Resurrected launching 9/23 and Diablo Immortal coming in 1H:22, we lean towards Diablo IV as the most likely large title to arrive next year," to take advantage of the halo benefits of multiple launches.

But there are also "multiple Warcraft mobile games and brand new IP" under development as well.

Turning to the key Call of Duty franchise, the firm expects "durability" through reopening and competition. At 125 million, it has nearly four times as many monthly active users as it did two years ago and has turned into a "large ecosystem of highly engaged players." Even with economic reopening, there's a path for CoD to generate $4 billion in revenue this year and $3.6 billion next year, it says.

Meanwhile Chinese regulatory risk is manageable, in part because ATVI has a small exposure at less than 5% of bookings, and China seems to be focused on games for minors rather than more mature content.

Next up it's looking to next month for hopefully favorable reviews for Call of Duty: Vanguard and Diablo II: Resurrected.

Its base case price target of $120 implies 46% upside - but a $150 bull case valuation suggests 83% upside in the stock.

Yesterday, Activision Blizzard made the cut of Overweight Media/Entertainment stocks at Wells Fargo, which got bullish on the sector while downgrading Software.