"Game On" is The Fly's weekly recap of the stories powering up or beating down video game stocks.

NEW RELEASES: This week's biggest release is Nintendo's (NTDOY) "Pokemon Scarlet" and "Pokemon Violet," which both release on November 18 exclusively for Switch systems. Also out this week is Activision Blizzard's (ATVI) "Call of Duty: Warzone 2.0," a free-to-play battle royale shooter out November 16 for PlayStation 4 (SONY), PS5, Xbox One (MSFT), PC, and Xbox Series X/S.

NPD HARDWARE: NPD analyst Mat Piscatella said that U.S. consumer spending on video game content, hardware and accessories totaled $4.3B during the month of October 2022, flat when compared to a year ago. Octover growth in digital sales and subscriptions for console and PC video game content, driven in large part by the release of Activision's "Call of Duty: Modern Warfare II," was offset by declines in mobile content and hardware. Year-to-date spending has fallen 7% compared to this point in 2021, at $42.7B. Dollar sales of video game hardware fell 10% in October when compared to a year ago, to $424M. Double-digit percentage dollar sales growth for both PlayStation 5 and Xbox Series consoles was offset by declines on other platforms. PlayStation 5 was the best-selling video game hardware of October in both unit and dollar sales, while Xbox Series ranked 2nd across both measures.

NPD SOFTWARE: Meanwhile, NPD's Piscatella also said that October U.S. video game content sales grew 2% vs last year, to $3.7B. Double-digit percentage growth in Console & PC content spending was driven by the launch of "Call of Duty: Modern Warfare II" in the October tracking period, compared to the launch of "Call of Duty: Vanguard" in November 2021. Eight of the top 20 best-selling premium games of October 2022 were new releases, including Warner Bros. Discovery's (WBD) "Gotham Knights," which ranked 2nd in October while debuting as the 14th best-selling game of 2022 year-to-date. Other top game sellers in October in the U.S. were Electronic Arts' (EA) "FIFA 23," "Madden NFL 23," and "NHL 23," Ubisoft's (UBSFY) "Mario + Rabbids: Sparks of Hope," Sega's (SGAMY) "Persona 5," Take-Two's (TTWO) "NBA 2K23," Nintendo's "Bayonetta 3," and Bandai Namco's (NCBDY) "Elden Ring."

ACTIVISION UPGRADES: Amid positive sales numbers for the latest "Call of Duty" release, at least two securities analysts have upgraded Activision Blizzard, whose acquisition by Microsoft is still pending antitrust approval in multiple countries. Last Thursday, Raymond James analyst Andrew Marok upgraded the stock to Outperform from Market Perform with a $95 price target. Following last year's announcement that Microsoft had agreed to acquire Activision for $95 per share in an all-cash transaction, Activision has traded at a persistent discount to the deal price driven by concerns around regulatory bodies blocking the deal, and the extended period until deal close, Marok told investors in a research note. In the months since, however, trends in Activision's core business have improved significantly, making a price drop on a deal break "less precipitous for a standalone ATVI share price," said the analyst. Marok still believes the deal will close as proposed, and as such, sees Activision's risk/reward "as having shifted solidly to the positive." He sees standalone company share support levels in the low- to mid-$60s.

Meanwhile, MKM Partners analyst Eric Handler this week upgraded Activision Blizzard to Buy from Neutral with an unchanged $95 price target. The current stock price is "severely discounting" the company's fundamental improvements and its "strong growth potential" in 2023, the analyst told investors in a research note. Activision shares appear much more linked to the perception of whether the acquisition by Microsoft gets approved, but even if the transaction was denied, the stock should merit an $85 fundamental value, providing 15% capital appreciation potential, Handler added.

OTHER STORIES TO WATCH:

• The legal battle between Apple (AAPL) and Epic Games has now reached the Ninth U.S. Circuit Court of Appeals, WSJ reports [more]
• CD Projekt (OTGLY) said the next-generation update for 2015's "The Witcher 3: Wild Hunt" is coming December 14 [more]
• Microsoft said it took action against up to 4.78M Xbox accounts [more]