EA fundamental outlook negatively impacted, Activision Blizzard model offers best risk/reward - Deutsche Bank

© Reuters

By Sam Boughedda

Deutsche Bank downgraded Electronic Arts (NASDAQ:EA) to Hold from Buy and upgraded Activision Blizzard (NASDAQ:ATVI) to Buy from Hold in separate research notes on Thursday.

Analysts cut EA's price target to $125 from $157, telling investors the downgrade is due to slower growth and a strategic reset.

"EA's fundamental outlook is being negatively impacted by (1) greater macro-related challenges, (2) a reset of EA's mobile strategy, and (3) less new content than we were anticipating next year (in part reflecting EA's decision to focus its investments more selectively)," said the analysts.

Compared to prior expectations, Deutsche Bank now forecasts lower levels of growth in FY23-FY25 and believes EA shares are fairly valued based on the new lower growth outlook.

On ATVI, they raised his firm's price target on the stock to $90 from $83 per share, stating that the upgrade is based on a "fundamental resurgence."

"We believe the company's business model offers the best risk/reward outlook across the sector this year," wrote the analysts.

They explained that the view is based on strong momentum across the company's key franchises, ATVI having the highest concentration of "must-have" content at a time when consumers are becoming increasingly selective, and its path to attractive shareholder returns even if the Microsoft (NASDAQ:MSFT) deal falls through.

"Despite industry-wide headwinds to consumer spending, we think ATVI can generate healthy levels of growth this year," the analysts stated.