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Time to Buy Activision Blizzard (ATVI) or Carvana (CVNA) Stock After Earnings?
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Two stocks receiving a considerable amount of attention leading up to their second-quarter earnings reports last week were Activision Blizzard ) and Carvana (CVNA - Free Report) ).
The possibility of Microsoft (MSFT - Free Report) ) still acquiring Activision Blizzard has dominated headlines with Carvana’s stock standing out for its staggering price performance and bullish momentum as investor sentiment grows.
More importantly, Activision Blizzard and Carvana were able to beat earnings expectations last Wednesday, adding fuel to the notion that now may be a good time to buy.
Q2 Results
The U.S. Federal Trade Commission and the European Commission are aiming to stop Microsoft’s $69 billion acquisition of Activision Blizzard and ATVI’s Q2 results reflected why there are monopoly-like concerns.
Impressively, Activision Blizzard highlighted its first quarterly net bookings of $1 billion which grew 50% year over year. More daunting is that operating income grew 72% YoY to $583 million compared to $338 million in the prior-year quarter.
Activision Blizzard flexed its gaming dominance by easily topping earnings expectations with Q2 EPS at $1.08 per share and 20% above estimates of $0.90 a share. Quarterly sales came in 1% above estimates at $2.46 billion. Overall, Q2 earnings soared 120% YoY with sales climbing 51% as inflation and the macroeconomic environment have brightened for the “Call of Duty” game developer.
Image Source: Zacks Investment Research
Equally impressive, Carvana showed justifications that its e-commerce platform still has the future potential to reap lucrative profits from buying and selling cars. On its way to posting a smaller adjusted loss of -$0.55 a share, Carvana reassuringly topped EPS estimates that called for a loss of -$1.13 a share. This was largely up from an adjusted EPS loss of -$2.35 in Q2 2022.
On the top line, sales of $2.96 billion came in 13% above Q2 expectations but dipped -24% from $3.88 billion in the prior-year quarter. Carvana stated the drop in revenue was due to the company’s internal prioritization of profitability initiatives. Notably, Carvana’s retail sales of used vehicles declined -35% to 76,350 cars but the company’s average gross profit per unit (GPU) almost doubled to a quarterly record of $6,520.
Image Source: Zacks Investment Research
Strengthening Outlook
Rising earnings estimates tend to be synonymous with the upward price movement in a stock and Activision Blizzard and Carvana are attractive in this regard.
Annual earnings estimates are nicely up for Activision Blizzard over the last quarter with the company expecting solid bottom line expansion. Fiscal 2023 earnings are now expected to jump 19% this year and rise another 6% in FY24 at $4.30 per share.
Image Source: Zacks Investment Research
Looking at Carvana, while the company is not yet profitable the current trend in earnings estimate revisions is very positive. An adjusted loss of -$5.25 a share is now expected in FY23 compared to estimates of -$7.20 three months ago.
Fiscal 2024 earnings estimates now reflect a narrower-adjusted loss of -$4.99 a share and have trended up from -$5.93 three months ago.
Image Source: Zacks Investment Research
Blazing Performance
The rising earnings estimates have continued to be a catalyst, especially for Carvana stock which has catapulted +821% this year after trading at lows of just under $4 a share last December.
Carvana’s potential is starting to win over investors again with the company cutting costs and recently implementing a $1.2 billion debt restructuring plan. Currently trading at $45 a share, the practicality of buying Carvana’s stock lies in momentum and heavy volume trading as shares have soared upon appeasing shareholders.
As for Activision Blizzard, more fundamental aspects are in play outside of the effects of a potential Microsoft takeover. Still, shares of ATVI are up +20% this year and it's noteworthy that Microsoft’s proposed acquisition price of $95 a share is 3% above current levels of $92 a share.
Image Source: Zacks Investment Research
Bottom Line
At the moment Activision Blizzard and Carvana stock both sport a Zacks Rank #2 (Buy). Their strong second-quarter reports were promising and the rising earnings estimates support more short-term upside.
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Time to Buy Activision Blizzard (ATVI) or Carvana (CVNA) Stock After Earnings?
Two stocks receiving a considerable amount of attention leading up to their second-quarter earnings reports last week were Activision Blizzard ) and Carvana (CVNA - Free Report) ).
The possibility of Microsoft (MSFT - Free Report) ) still acquiring Activision Blizzard has dominated headlines with Carvana’s stock standing out for its staggering price performance and bullish momentum as investor sentiment grows.
More importantly, Activision Blizzard and Carvana were able to beat earnings expectations last Wednesday, adding fuel to the notion that now may be a good time to buy.
Q2 Results
The U.S. Federal Trade Commission and the European Commission are aiming to stop Microsoft’s $69 billion acquisition of Activision Blizzard and ATVI’s Q2 results reflected why there are monopoly-like concerns.
Impressively, Activision Blizzard highlighted its first quarterly net bookings of $1 billion which grew 50% year over year. More daunting is that operating income grew 72% YoY to $583 million compared to $338 million in the prior-year quarter.
Activision Blizzard flexed its gaming dominance by easily topping earnings expectations with Q2 EPS at $1.08 per share and 20% above estimates of $0.90 a share. Quarterly sales came in 1% above estimates at $2.46 billion. Overall, Q2 earnings soared 120% YoY with sales climbing 51% as inflation and the macroeconomic environment have brightened for the “Call of Duty” game developer.
Image Source: Zacks Investment Research
Equally impressive, Carvana showed justifications that its e-commerce platform still has the future potential to reap lucrative profits from buying and selling cars. On its way to posting a smaller adjusted loss of -$0.55 a share, Carvana reassuringly topped EPS estimates that called for a loss of -$1.13 a share. This was largely up from an adjusted EPS loss of -$2.35 in Q2 2022.
On the top line, sales of $2.96 billion came in 13% above Q2 expectations but dipped -24% from $3.88 billion in the prior-year quarter. Carvana stated the drop in revenue was due to the company’s internal prioritization of profitability initiatives. Notably, Carvana’s retail sales of used vehicles declined -35% to 76,350 cars but the company’s average gross profit per unit (GPU) almost doubled to a quarterly record of $6,520.
Image Source: Zacks Investment Research
Strengthening Outlook
Rising earnings estimates tend to be synonymous with the upward price movement in a stock and Activision Blizzard and Carvana are attractive in this regard.
Annual earnings estimates are nicely up for Activision Blizzard over the last quarter with the company expecting solid bottom line expansion. Fiscal 2023 earnings are now expected to jump 19% this year and rise another 6% in FY24 at $4.30 per share.
Image Source: Zacks Investment Research
Looking at Carvana, while the company is not yet profitable the current trend in earnings estimate revisions is very positive. An adjusted loss of -$5.25 a share is now expected in FY23 compared to estimates of -$7.20 three months ago.
Fiscal 2024 earnings estimates now reflect a narrower-adjusted loss of -$4.99 a share and have trended up from -$5.93 three months ago.
Image Source: Zacks Investment Research
Blazing Performance
The rising earnings estimates have continued to be a catalyst, especially for Carvana stock which has catapulted +821% this year after trading at lows of just under $4 a share last December.
Carvana’s potential is starting to win over investors again with the company cutting costs and recently implementing a $1.2 billion debt restructuring plan. Currently trading at $45 a share, the practicality of buying Carvana’s stock lies in momentum and heavy volume trading as shares have soared upon appeasing shareholders.
As for Activision Blizzard, more fundamental aspects are in play outside of the effects of a potential Microsoft takeover. Still, shares of ATVI are up +20% this year and it's noteworthy that Microsoft’s proposed acquisition price of $95 a share is 3% above current levels of $92 a share.
Image Source: Zacks Investment Research
Bottom Line
At the moment Activision Blizzard and Carvana stock both sport a Zacks Rank #2 (Buy). Their strong second-quarter reports were promising and the rising earnings estimates support more short-term upside.