Analyst Note
| Neil Macker, CFA |Activision Blizzard posted a better-than-expected third quarter, with top line and EBITDA ahead of FactSet consensus estimates. As expected, GAAP revenue continued to decline, down 14% year over year due to the continued knock-on effect of weak sales and user retention of Call of Duty: Vanguard versus the 2020 installment. This year’s installment, Modern Warfare II, has gotten off to an impressive start since its launch on Oct. 28, boding well for the next few quarters. Due to the pending acquisition by Microsoft, management is foregoing earnings calls. Despite the recent United Kingdom regulator decision to further examine the deal, we still believe that the merger will be approved, though the closing will likely not occur until the summer of 2023 at the earliest. We are maintaining our fair value estimate of $92, which balances our standalone valuation (also at $92), the acquisition value of $95 a share, and the potential for further regulatory intervention.