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Activision (ATVI) Up 1.8% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Activision Blizzard, Inc (ATVI - Free Report) . Shares have added about 1.8% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Activision Q2 Earnings Beat Estimates, View Raised

Activision Blizzard posted second-quarter 2017 results wherein earnings of $0.55 and revenues (excluding deferrals) of $1.418 billion, easily beat the respective Zacks Consensus Estimate of $0.30 and $1.214 billion. However, on a year-over-year basis, revenues were down approximately 10%.

Quarterly Numbers

Including deferral revenues, Activision reported sales of $1.631 billion, up 3.9%. The top line was driven by continued strength in digital revenues, success of Overwatch and the buyout of King Digital Entertainment.

Activision earned $1 billion of in-game revenues in the quarter. Also, the company announced the first seven-team sales for its Overwatchleague.

Segment wise, product sales were $481 million, down 4%, whereas subscription, licensing and other revenues grew 7.6% to $1.150 billion.

On the basis of distribution channels, Activision reported retail channel sales of $260 million (down 30% year over year) and digital online revenues of $1.309 billion (up 15%). Digital revenues contributed 80% of total revenue in the quarter. Other revenues grew 13% year over year to $62 million.

On a geographical basis, revenues from North America were flat at $858 million, while that from EMEA grew 6% to $538 million. Revenues from Asia Pacific grew 16% to $235 million.

On a non-GAAP (redefined) basis, operating income was $576 million compared with $480 million reported in the year-ago quarter.

Notably, 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.

The company had over 407 million monthly active users (MAUs) at quarter end.

Activision and Blizzard divisions’ online player community MAUs were 47 million and 46 million, respectively. King Digital reported MAUs of 314 million due to the absence of any big releases.

Financial Position

Activision exited the quarter with $3.278 billion in cash and cash equivalents. Long-term debt was $4.387 billion. Operating cash flow for the quarter was $265 million.

Outlook

For 2017, Activision expects GAAP revenues of $6.4 billion and earnings per share of $1.05 compared with an earlier projection of revenues of $6.1 billion and earnings per share of $0.88. On a non-GAAP basis, revenues and earnings are expected to be $6.4 billion and $1.94 per share, respectively, against an earlier projection of revenues of $6.1 billion and earnings per share of $1.80. Deferral revenues are expected around $175 million.

For third-quarter 2017, Activision anticipates GAAP revenues of $1.385 billion and earnings per share of $0.09. On a non-GAAP basis, revenues and earnings are likely to be $1.385 billion and $0.34 per share, respectively. Deferral revenues are expected to be around $315 million.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend for fresh estimates. There have been eight revisions higher for the current quarter compared to one lower.

VGM Scores

At this time, Activision's stock has a subpar Growth Score of D, a grade with the same score on the momentum front. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. The stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.




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