Earnings Preview: ATVI - Analyst Blog

By Zacks Equity Research,

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Activision Blizzard Inc. ( ATVI ) is scheduled to release its fiscal first quarter 2012 results after market closes on Wednesday, May 9, 2012. In the run up to the earnings release, we do not notice any changes in the analyst estimates for the quarter.  Activision has outperformed the Zacks Consensus Estimate by an astounding 191.4% over the last four quarters and we expect yet another earnings beat from the company.

Prior Quarter Highlights   

Activision's fourth quarter results surpassed the Zacks Consensus Estimate on both top and bottom lines. Activision's earnings came in at 59 cents per share (including stock based compensation but excluding one time items), ahead of the Zacks Consensus Estimate of 55 cents.

Though non-GAAP revenues (excluding revenues from deferral and related cost of sales) shrank 5.5% year over year to $2.41 billion, it easily surpassed the Zacks Consensus Estimate of $2.20 billion. Despite the year-over-year decline, Activision's revenue beat was primarily attributed to its digital revenue streams and online presence of popular titles such as World of Warcraft , Call of Duty and Skylanders .

For further details please read: Activision Tops Estimates

Current Quarter Expectations

For the first quarter of 2012, Activision expects non-GAAP EPS (excluding stock based compensation and other one time items) of 3 cents on revenues of $525 million. The Zacks Consensus Estimate projects earnings of 1 cent per share on revenues of $551.0 million for the quarter.

For fiscal 2012, Activision's non-GAAP EPS (excluding stock based compensation and other one time items) estimate is 94 cents, above the Zacks Consensus Estimate of 88 cents. Total revenue (non-GAAP) is estimated to be $4.50 billion, below the Zacks Consensus Estimate of $4.56 billion.

Estimates Trend Revision

Over the past 30 days, none of the four analysts covering the stock revised the estimates. The Zacks Consensus Estimate for the first quarter of 2012 also did not move, remaining at 1 cent.

For fiscal 2012, only one out of the 4 analysts covering the stock made a negative revision, while no upward revision was noticed over the last 30 days. The Zacks Consensus Estimate for fiscal 2012 decreased by a cent to 88 cents over the same period.

Analysts covering the stock are cautiously optimistic about Activision due to the continuous decline in sales in the video game industry over the last few months. Moreover, lower than expected Call of Duty DLC sales and continuous loss of subscribers related to World of Warcraft are the other factors that may limit the growth of the company. However, Activision's foray into the mobile gaming market is expected to be a long-term positive catalyst.

Despite these factors, analysts are optimistic about decent fiscal 2012 results based on Activision's release of Giants , the squeal of Skylanders and Diablo III . Moreover, the releases of Spider-Man , Tony Hawk , Transformers and Call of Duty Black Ops 2 will provide the necessary boost to the company's guided top-line and bottom-line figures.

Our Take

We expect that the company's continued initiatives to expand in the digital online business segment will pay rich dividends in the near term. A healthy product pipeline for 2012 will also boost Activision's top-line growth in the long term.

However, the softness in the video game industry and Activision's limited presence in the social gaming market coupled with significant competition from Electronic Arts Inc. ( EA ) and Take-Two Interactive Software Inc. ( TTWO ) keep us Neutral on the stock over the long term.

Currently, Activision Blizzard has a Zacks #3 Rank, which implies a 'Hold' rating in the short term.

ACTIVISION BLZD (ATVI): Free Stock Analysis Report
ELECTR ARTS INC (EA): Free Stock Analysis Report
TAKE-TWO INTER (TTWO): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: ATVI , EA , TTWO

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