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What to Expect from Activision Blizzard (ATVI) Q3 Earnings?
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Activision Blizzard Inc. is set to report third-quarter 2016 results on Nov 3. Last quarter, the company delivered a positive earnings surprise of 8.11%. The company has delivered positive earnings surprises with an average beat of 33.54% in the last four quarters.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Increasing digital revenues and continued strength of the Call of Duty title should cushion earnings in the third quarter. Plus, new titles like the World of Warcraft: Legion and Destiny: Rise of Iron should add to the top-line numbers. Also, reportedly Overwatch (released on May 24, 2016) has crossed 20 million users, which again should add to sales numbers. More importantly, the acquisition of King Digital should continue to boost results.
Of late, Activision has been making giant strides in its attempts to become a broad-based media company. Apart from launching a movie studio, the company is also strengthening its presence in the lucrative e-sports market. The company is contemplating creating an Overwatch league for this franchise, which could serve as a new revenue stream.
Nevertheless, higher adoption of free-to-play games and significant competition from the likes of Electronic Arts (EA - Free Report) , Take Two Interactive and Glu Mobile, remain the near-term headwinds. Also, an uncertain macro-economic outlook is adding to its woes as video games form a part of discretionary spending. Also, the company’s dependence on a handful of mega franchises (Call of Duty, World of Warcraft) for the lion’s share of its revenues makes it highly vulnerable.
For third quarter 2016, Activision expects non-GAAP (redefined) net revenue of $1.490 billion while earnings are expected to be 39 cents per share. It is to be noted that Activision and a host of other video game companies have changed the way they report their non GAAP fiscal results to meet stricter guidelines imposed by the SEC. The company will no longer include the impact from revenue deferrals accounting treatment on certain online enabled products.
Earnings Whispers
Our proven model does not conclusively show that Activision is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: Activision’s Earnings ESP is -5.13%. This is because the Most Accurate estimate stands at 37 cents whereas the Zacks Consensus Estimate stands at 39 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Activision’s Zacks Rank #1 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Here are a couple of stocks, which you may consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Inovalon Holdings, Inc. (INOV - Free Report) with an Earnings ESP of +50.00% and a Zacks Rank #1
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What to Expect from Activision Blizzard (ATVI) Q3 Earnings?
Activision Blizzard Inc. is set to report third-quarter 2016 results on Nov 3. Last quarter, the company delivered a positive earnings surprise of 8.11%. The company has delivered positive earnings surprises with an average beat of 33.54% in the last four quarters.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Increasing digital revenues and continued strength of the Call of Duty title should cushion earnings in the third quarter. Plus, new titles like the World of Warcraft: Legion and Destiny: Rise of Iron should add to the top-line numbers. Also, reportedly Overwatch (released on May 24, 2016) has crossed 20 million users, which again should add to sales numbers. More importantly, the acquisition of King Digital should continue to boost results.
Of late, Activision has been making giant strides in its attempts to become a broad-based media company. Apart from launching a movie studio, the company is also strengthening its presence in the lucrative e-sports market. The company is contemplating creating an Overwatch league for this franchise, which could serve as a new revenue stream.
Nevertheless, higher adoption of free-to-play games and significant competition from the likes of Electronic Arts (EA - Free Report) , Take Two Interactive and Glu Mobile, remain the near-term headwinds. Also, an uncertain macro-economic outlook is adding to its woes as video games form a part of discretionary spending. Also, the company’s dependence on a handful of mega franchises (Call of Duty, World of Warcraft) for the lion’s share of its revenues makes it highly vulnerable.
For third quarter 2016, Activision expects non-GAAP (redefined) net revenue of $1.490 billion while earnings are expected to be 39 cents per share. It is to be noted that Activision and a host of other video game companies have changed the way they report their non GAAP fiscal results to meet stricter guidelines imposed by the SEC. The company will no longer include the impact from revenue deferrals accounting treatment on certain online enabled products.
Earnings Whispers
Our proven model does not conclusively show that Activision is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: Activision’s Earnings ESP is -5.13%. This is because the Most Accurate estimate stands at 37 cents whereas the Zacks Consensus Estimate stands at 39 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Activision’s Zacks Rank #1 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
ACTIVISION BLZD Price and EPS Surprise
ACTIVISION BLZD Price and EPS Surprise | ACTIVISION BLZD Quote
Stocks to Consider
Here are a couple of stocks, which you may consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Stratasys Ltd.(SSYS - Free Report) with an Earnings ESP of +41.67% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Inovalon Holdings, Inc. (INOV - Free Report) with an Earnings ESP of +50.00% and a Zacks Rank #1
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>