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Why Activision Blizzard Is the Best Video Game Stock After Earnings

Chris Lange

Published: February 13, 2019 9:50 am

Last Updated: January 31, 2020 12:40 am

Activision Blizzard Inc. (NASDAQ: ATVI) released its most recent quarterly report after the markets closed on Tuesday. Of all the video game stocks, it seems that Activision is the only one to come out ahead after earnings. While Fortnite took its toll on all the major consoles, Activision is playing the long game.

This video game producer posted $1.29 in earnings per share (EPS) and $2.84 billion in revenue, which compared with Thomson Reuters consensus estimates of $1.28 in EPS and $3.04 billion in revenue. In the fourth quarter of last year, Activision said it had EPS of $0.94 on $2.64 billion in revenue.

During the latest quarter, the Activision segment had 53 million monthly active users (MAUs), growing by a double-digit percentage quarter over quarter. Fourth-quarter segment revenues grew 6% year over year to $1.41 billion, and operating income increased 14% to $723 million.

At the same time, Blizzard had 35 million MAUs in the fourth quarter, as Overwatch and Hearthstone saw sequential stability, and World of Warcraft saw expected declines post-expansion-launch. Fourth-quarter segment revenues grew 15% year over year to $686 million, and operating income increased 51% to $241 million.

King had 268 million MAUs in the quarter, growing sequentially, driven by the successful launch of Candy Crush Friends Saga. Fourth-quarter segment revenues grew 5% to $543 million, and operating income increased 28% to $207 million.

Looking ahead to the first quarter, the company expects to see EPS of $0.63 and revenue of $1.72 billion. Consensus estimates call for $0.46 in EPS and $1.46 billion in revenue for the quarter.

Bobby Kotick, CEO of Activision Blizzard, commented:

While our financial results for 2018 were the best in our history, we didn’t realize our full potential. To help us reach our full potential, we have made a number of important leadership changes. These changes should enable us to achieve the many opportunities our industry affords us, especially with our powerful owned franchises, our strong commercial capabilities, our direct digital connections to hundreds of millions of players, and our extraordinarily talented employees.

The stock was last seen up more than 7% at $44.86 per share, in a 52-week range of $39.85 to $84.68. The consensus price target is $60.54.