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Activision Blizzard (ATVI) Q4 Earnings: Is a Beat in Store?
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We expect Activision Blizzard, Inc. to beat expectations when it reports fourth-quarter 2016 results on Feb 9. Last quarter, it posted a 17.95% positive earnings surprise. It is noteworthy that Activision has outperformed the Zacks Consensus Estimate in the preceding four quarters with an average positive earnings surprise of 28.41%.
Why a Likely Positive Surprise?
Our proven model shows that Activision is likely to beat earnings estimates this quarter. 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. Activision has the right combination of the two key components.
Zacks ESP: The company has an Earnings ESP of +2.78%. This is because the Most Accurate estimate stands at 74 cents while the Zacks Consensus Estimate is pegged at 72 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Activision carries a Zacks Rank #3, which when combined with a positive ESP make us reasonably confident of an earnings beat.
Conversely, the Sell-rated stocks (Rank #4 and 5) should never be considered going into an earnings announcement.
What is Driving the Better-than-Expected Earnings?
Increasing digital revenues and continued strength in titles like Call of Duty should cushion earnings. The company’s Call of Duty Infinite Warfare has relatively underperformed compared to last year’s Call of Duty: Black Ops 3. However, new releases like the World of Warcraft: Legion and Destiny: Rise of Iron and stupendous success of Overwatch (released on May 24, 2016) should continue to add to sales numbers. More importantly, the acquisition of King Digital should continue to boost results.
Activision is aggressively working on becoming a media entertainment giant, somewhere on the lines of The Walt Disney Company. Apart from launching a movie studio, the company is also strengthening its presence in the lucrative e-sports market. Recently, Activision announced the launch of Overwatch e-sports league. Plus, it announced a new consumer product division to be spearheaded by an ex-Walt Disney executive, Tim Kiplin.
Nevertheless, the 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 adds 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 fourth-quarter 2016, Activision expects non-GAAP (redefined) net revenue of $1.856 billion while earnings are expected to be 40 cents per share.
Other Stocks to Consider
Here are some stocks that, as per our model, have the right combination of elements to post an earnings beat this quarter:
Applied Optoelectronics Inc. (AAOI - Free Report) with an Earnings ESP of +15.87% and a Zacks Rank #1.
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Activision Blizzard (ATVI) Q4 Earnings: Is a Beat in Store?
We expect Activision Blizzard, Inc. to beat expectations when it reports fourth-quarter 2016 results on Feb 9. Last quarter, it posted a 17.95% positive earnings surprise. It is noteworthy that Activision has outperformed the Zacks Consensus Estimate in the preceding four quarters with an average positive earnings surprise of 28.41%.
Why a Likely Positive Surprise?
Our proven model shows that Activision is likely to beat earnings estimates this quarter. 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. Activision has the right combination of the two key components.
Zacks ESP: The company has an Earnings ESP of +2.78%. This is because the Most Accurate estimate stands at 74 cents while the Zacks Consensus Estimate is pegged at 72 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Activision carries a Zacks Rank #3, which when combined with a positive ESP make us reasonably confident of an earnings beat.
Conversely, the Sell-rated stocks (Rank #4 and 5) should never be considered going into an earnings announcement.
Activision Blizzard, Inc Price and EPS Surprise
Activision Blizzard, Inc Price and EPS Surprise | Activision Blizzard, Inc Quote
What is Driving the Better-than-Expected Earnings?
Increasing digital revenues and continued strength in titles like Call of Duty should cushion earnings. The company’s Call of Duty Infinite Warfare has relatively underperformed compared to last year’s Call of Duty: Black Ops 3. However, new releases like the World of Warcraft: Legion and Destiny: Rise of Iron and stupendous success of Overwatch (released on May 24, 2016) should continue to add to sales numbers. More importantly, the acquisition of King Digital should continue to boost results.
Activision is aggressively working on becoming a media entertainment giant, somewhere on the lines of The Walt Disney Company. Apart from launching a movie studio, the company is also strengthening its presence in the lucrative e-sports market. Recently, Activision announced the launch of Overwatch e-sports league. Plus, it announced a new consumer product division to be spearheaded by an ex-Walt Disney executive, Tim Kiplin.
Nevertheless, the 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 adds 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 fourth-quarter 2016, Activision expects non-GAAP (redefined) net revenue of $1.856 billion while earnings are expected to be 40 cents per share.
Other Stocks to Consider
Here are some stocks that, as per our model, have the right combination of elements to post an earnings beat this quarter:
Pandora Media, Inc. with an Earnings ESP of +10.81% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Optoelectronics Inc. (AAOI - Free Report) with an Earnings ESP of +15.87% and a Zacks Rank #1.
Just Released – Driverless Cars: Your Roadmap to Mega-Profits Today
In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>