Investing

What to Look for in Activision Blizzard Earnings

Chris Lange

Published: February 11, 2016 10:10 am

Last Updated: January 13, 2020 1:18 pm

Activision Blizzard Inc. (NASDAQ: ATVI) is scheduled to report its fourth-quarter financial results after the markets close on Thursday. The consensus estimates from Thomson Reuters call for $0.86 in earnings per share (EPS) on $2.2 billion in revenue. The same period from the previous year had $0.94 in EPS on $2.21 in revenue.

This company reported outstanding third-quarter earnings, made a huge acquisition and is a franchise pick at Jefferies. Activision Blizzard develops and publishes online, personal computer (PC), video game console, handheld, mobile and tablet games worldwide.

The company develops and publishes interactive entertainment software products through retail channels or digital downloads, as well as downloadable content to a range of gamers. The Call of Duty franchise has propelled earnings for this industry powerhouse for years, and “Call of Duty: Black Ops 3” came out just in time for the holidays. It was one of the top-selling games over the three-day Black Friday and the Christmas selling periods.

The big news last fall was the company’s purchase of Candy Crush saga creator King Digital Entertainment. Most of Wall Street thinks the buy is an outstanding move for the company, and specifically the synergies between the two companies was cited. Many analysts feel that the key to unlocking some monster value is creating and cross-promoting the Activision product inside the King Digital mobile distribution network.

Some on Wall Street feel the guidance Activision gave when it last reported is very conservative. They also think the content it will release in 2016 is outstanding and not fully reflected in the guidance. The growth in the most recent quarter was particularly impressive given two challenges: the strong dollar and unfavorable comparisons to the prior year quarter. Much of that growth was fueled by Destiny, Heroes of the Storm and Hearthstone, which now have 70 million registered players combined. The three titles have generated over $1.25 billion in non-GAAP revenues to date.

A few analysts weighed in on Activision prior to the earnings report:

• Stifel reiterated a Buy rating.
• Webush reiterated a Buy rating.
• Baird reiterated a Buy rating.
• Credit Suisse has an Outperform rating and raised its price target to $41 from $40.

So far in 2015, Activision Blizzard has underperformed the broad markets, with the stock down 22% year to date. Over the course of the past 52 weeks, the stock is up nearly 37%.

Shares of Activision Blizzard were trading down 1.6% at 29.66 Thursday morning, with a consensus analyst price target of $42.06 and a 52-week trading range of $22.28 to $39.34.