Back to top

Activision Blizzard (ATVI) Q3 Earnings: What's in the Cards?

Read MoreHide Full Article

Activision Blizzard (ATVI - Free Report) is set to report third-quarter 2018 results on Nov 8.

The company delivered average four-quarter positive earnings surprise of 25.2%. In the last reported quarter, the company's earnings of 62 cents per share topped the Zacks Consensus Estimate of 36 cents per share. The figure increased 12.7% from the year-ago quarter.

Revenues increased 0.6% year over year to $1.6 billion and came ahead of the Zacks Consensus Estimate of $1.4 billion. The year-over-year growth was primarily driven by its well-known franchises like Call of Duty and Destiny. Moreover, King Digital’s Candy Crush continues to contribute significantly to the company’s revenues.

For the third quarter, Activision expects revenues and earnings to be $1.49 billion and 37 cents per share, respectively.

The Zacks Consensus Estimate for the quarter to be reported is pegged at 51 cents per share, indicating year-over-year decline of 15%. Further, the consensus mark for revenues is pegged at $1.67 billion, indicating a decline of 12.4% from the year-ago quarter

Let’s see how things are shaping up for the upcoming announcement.

Factors Likely to Influence Q3 Results

Activision is increasingly banking on its mobile platform to drive top-line growth. In the last quarter, mobile and ancillary revenues increased 5.7% year over year and accounted for 31.7% of the total revenues.  

Notably, the company also announced its collaboration with Tencent for Call of Duty mobile, which will make the best-selling franchise available for millions of Chinese mobile gamers. Activision expanded its mobile gaming portfolio through the launch of King’s role-playing game (RPG), Legend of Solgard.

Call of Duty and Destiny are the biggest growth drivers for Activision. Notably, more than 200 million players have played the Black Ops series for a total of more than 15 billion hours over the game’s lifetime, reflecting the franchise’s popularity.

The company added new features and games to Call of Duty (COD) franchise with the launch of Call of Duty: WWII Shadow War and Call of Duty: Black Ops 4 Blackout Beta on Aug 30 and Sep 12, respectively.  

In the soon-to-be reported quarter, the company launched Destiny 2: Forsaken, which is the first-ever hybrid 4v4 game mode.

Moreover, King Digital’s Candy Crush continues to contribute significantly to the company’s revenues. King Digital’s Candy Crush Saga and Candy Crush Soda Saga continue to be two of the top 10 grossing games on iOS and Android app stores (United States).

Notably, Activision announced the launch of Candy Crush Friends Saga to expand its existing franchise.

Further, Activision is cashing in on the growing e-sports market through its Overwatch League. Approximately, more than 130 million people follow such tournaments around the world, which is a positive. Moreover, the company also launched Call of Duty World League.

The company continues to add new teams to its Overwatch League with nine teams coming from outside the United States. This indicates the growing popularity of e-sports, which is expected to increase viewership, user engagement and revenues.

Moreover, Activision is poised to benefit from its multi-annual deal with Twitter (TWTR - Free Report) , Disney and Amazon’s Twitch to air Overwatch League’s highlights and live content.  

However, the company faces intense competition from the likes of Electronic Arts (EA - Free Report) and Take Two Interactive (TTWO - Free Report) , as they have also bolstered their partnerships in the e-sports space, making it increasingly competitive.

Activision's dependence on a few franchises is concerning as underperformance of any title is bound to adversely impact revenues. Moreover, continued investment in the digital market coupled with additional marketing expenses ahead of COD release may hurt its profitability in the near term.

Activision currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here..

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.      

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.   

See the pot trades we're targeting>>


More from Zacks Analyst Blog

You May Like