Seeing Strength In Weakness, Hilliard Lyons Upgrades Activision To Buy

After a mixed earnings report last Thursday, Activision Blizzard, Inc. (NASDAQ: ATVI) shares were up nearly 4 percent at $29.23 on Tuesday. The strength in Activision Blizzard is attributable to Hilliard Lyons analyst Jeffrey Thomison, who upgraded the video game publisher from Neutral to Buy.

Thomison stated that the recent weakness from earnings provides a window of buying opportunity. Among the positive investment factors he includes are Activision's fundamentals, financial condition, and growth opportunities. With a specific look into growth opportunities, Thomison highlights three potential catalysts:

• King Digital Entertainment (NYSE: KING)
• E-Sports
• Product Pipeline

Thomison said the mobile segment is the "largest and fastest growing segment of the gaming industry." This makes the $5.9 billion dollar acquisition attractive to Activision in Thomison's opinion, given its "considerable [efficiency] in size and acumen."

While the e-sports business impact has been covered exhaustively, Thomison believes Activision's acquisition of MLG makes a "great deal of strategic sense" while also presenting a potential long-termcatalyst for the stock given e-sports recent burst in growth.

Lastly, Thomison highlighted his enthusiasm for the upcoming slate in the product pipeline, including some of Activision Blizzard's other ventures such as Activision Blizzard Studios. The studio's first production will be an animated production -- "Skylanders Academy" based on the Skylanders game. Following this will be the June 2016 release of "Warcraft," based on Blizzard's storied PC franchise. These "other" ventures don't include Activision's newest franchise Overwatch, which has been under beta testing and has drawn excitement from company and players according to Thomison.

Given Activision's portfolio of franchises, combined with their product pipeline, and "attractive entry point" in the gaming industry cycle, Thomison sets his 1-year price target to $34.