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Activision (ATVI) Q3 Earnings and Revenues Beat (Revised)

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Activision Blizzard Inc.  posted third-quarter 2017 non-GAAP earnings of 56 cents, beating the Zacks Consensus Estimate of 45 cents. Moreover, revenues (including deferrals) of $1.9 billion surpassed the ZacksConsensus Estimate of $1.7 billion.

Quarterly Numbers

Excluding deferral revenues, Activision reported sales of $1.6 billion, up 3%. The top line continues to be driven by strength in digital revenues, Overwatch and the buyout of King Digital Entertainment. More importantly, Activision signed sponsorship deals with Hewlett-Packard and Intel.

Activision Blizzard, Inc Price, Consensus and EPS Surprise

Activision Blizzard, Inc Price, Consensus and EPS Surprise | Activision Blizzard, Inc Quote

Destiny 2 released on Sep 6, 2017 has fast emerged as a favourite with the players. Per NPD, Destiny 2 was the top selling game in September. The companyalso announced that Destiny 2 achieved a “new high watermark in digital full game downloads at over 50% of console sell-through.” With Destiny 2 released for PC gamers, Activision has statedthat the new game has outpaced the original Destiny in terms of consumer spend.

Activision earned $1 billion of in-game revenues in the quarter.

Segment wise, product sales were $384 million, up 8.2%, whilesubscription, licensing and other revenues grew 1.7% to $1.2 billion.

On the basis of distribution channels, Activision reported retail channel sales of $168 million (up 7% year over year) and digital online revenues of $1.35 billion (up 1%). Digital revenues contributed 84% of total revenuesin the quarter. Other revenues grew 43% year over year to $96 million.

On a geographical basis, revenues from North America were flat at $798 million, while that from EMEA grew 19% to $593 million. Revenues from Asia Pacific fell 17% to $227 million.

On a non-GAAP basis, operating income was $493 million compared with $542 million reported in the year-ago quarter.

Notably, Activision and a host of other video-game companies have changed the way of reportingtheir 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.

The company had over 384 million monthly active users (MAUs) at quarter end, down 20.3% year over year.

Also, Activision and Blizzard divisions’ online player community MAUs were 49 million and 42 million, respectively. King Digital reported MAUs of 293 million, down 25.6% year over year due to the absence of any big releases.

Financial Position

Activision exited the quarter with $3.6 billion in cash and cash equivalents. Long-term debt was $4.4 billion. Operating cash flow for the quarter was $456 million.

Outlook

For 2017, Activision expects GAAP revenues of $6.8 billion and earnings per share of $1.22 compared with an earlier projection of revenues of $6.4 billion and earnings of $1.05. On a non-GAAP basis, revenues and earnings are expected to be $6.8 billion and $2.08 per share, respectively, against apreviousprojection of revenues of $6.4 billion and earnings of $1.94.

The Zacks Consensus Estimate for revenues and earnings is pegged at $6.8 billion and $2.16 per share, respectively.

For fourth-quarter 2017, Activision anticipates GAAP revenues of $1.7 billion and earnings per share of 10 cents. On a non-GAAP basis, revenues and earnings are likely to be $1.7 billion and 36 cents per share, respectively.

Zacks Rank & Stock Price Movement

At present, Activision carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Activision have registered impressive growth in the past year. The stock generated a return of 50.9%, outperformingthe industry’s gain of 33.4%.

Other Stocks to Consider

Top-ranked stocks in the broader technology sector include NVIDIA Corporation (NVDA - Free Report) Applied Materials (AMAT - Free Report) , and Jabil Inc (JBL - Free Report) . While NVIDIA Corp and Jabil sport a Rank #1, Applied Materials carriesa Zacks Rank#2 (Buy).

Long-term earnings growth rate for NVIDIA, Applied Materials and Jabil is currently projected to be 11.2%, 17.1% and 12%, respectively.

 

(We are reissuing this article to correct a mistake. The original article, issued Friday, November 3, 2017, should no longer be relied upon.)

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