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Activision ETFs Set to Shine Bright on Strong Q1 Results

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The coronavirus outbreak has been a blessing in disguise for the video gaming industry as people switched over to in-house entertainment sources while social-distancing amid the pandemic.

Recently-released data from The NPD Group reflects that the video game industry, including packaged media, digital, consoles and accessories, saw strong sales in March, with people spending a total of around $5.6 billion. Notably, the figure has risen 18% year over year.

Riding the trend, Activision Blizzard, Inc. , which reported first-quarter 2021 earnings results on May 4, has delivered better-than-expected results. Moreover, it has returned around 1.6% since the earnings release.

Q1 Earnings at a Glance

The company reported first-quarter 2021 non-GAAP earnings of 98 cents per share, up 28.9% year over year. Consolidated revenues rose 27.2% year over year to $2.27 billion. Adjusting for revenues from non-reportable segments, net effect from the recognition of deferred revenues and elimination of intersegment revenues, total revenues jumped 35% to $1.98 billion. The Zacks Consensus Estimate for earnings and revenues was pegged at 69 cents per share and $1.75 billion, respectively.

However, Activision Blizzard witnessed a year-over-year rise in Monthly Active Users (MAUs) during the quarter ended Mar 31, 2021. Overall MAUs came in at 435 million in comparison with 407 million as of Mar 31, 2020. Moreover, the company’s net bookings rose 35.7% year over year to $2.06 billion. Going on, in-game net bookings were $1.34 billion, up 40.5% year over year.

Pandemic a Boon for Video Gaming Industry

It also seems like the boom in the video gaming space may remain in the post-pandemic era as the outbreak has changed the lifestyle and preferences of Americans to a large extent.

Activision (44.9% of revenues) revenues rose 71.7% year over year to $891 million. The division had 150 million MAUs as of Mar 31, 2021, up 47.1% year over year. The segment’s top-line growth was driven by Call of Duty: Black Ops Cold War and Warzone in-game revenues, strong premium sales, and Call of Duty Mobile.

Moreover, Call of Duty franchise MAUs climbed sequentially and grew more than 40% year over year in the first quarter.

Guidance

For second-quarter 2021, Activision Blizzard predicts non-GAAP revenues of $2.13 billion and earnings of 91 cents per share. Net bookings are expected at $1.85 billion. For 2021, Activision Blizzard predicts non-GAAP revenues of $8.37 billion and earnings of $3.42 per share. Net bookings are anticipated to be $8.60 billion.

ETFs to Ride the Tide

Against this backdrop, investors can take a look at the following ETFs:

VanEck Vectors Video Gaming and eSports ETF (ESPO - Free Report)

The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Video Gaming and eSports Index, which is intended to track the overall performance of companies involved in video game development, esports, and related hardware and software. It holds 25 stocks in its basket. Activision Blizzard holds the sixth spot in the fund, with 5.16% weight. With AUM of $831.7 million, the fund charges 55 basis points (bps) in expense ratio. The fund has returned about 0.4% since Activision Blizzard’s earnings release (read: Video Gaming ETFs to Shine Bright on Soaring Sales in March).

Global X Video Games & Esports ETF (HERO - Free Report)

The fund seeks to invest in companies that develop or publish video games, facilitate the streaming and distribution of video gaming or esports content, own and operate within competitive esports leagues, or produce hardware used in video games and esports, including augmented and virtual reality. It holds 39 stocks in its basket. Activision Blizzard holds the fourth spot in the fund, with 6.17% weight. With AUM of $694.2 million, the fund charges 50 bps in expense ratio. The fund has gained around 1% since Activision Blizzard’s earnings release (read: Grab These 5 ETFs as Coronavirus Cases Continue to Rise).

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