Markets

Activision (ATVI) Up 12.2% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Activision Blizzard, IncATVI . Shares have added about 12.2% 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 drivers.

Activision Q1 Earnings & Revenues Beat Estimates

Activision Blizzard posted first-quarter 2017 adjusted earnings of $0.27 and revenues (including deferrals) of $1.196 billion, which easily beat the respective Zacks Consensus Estimate of $0.16 and $1.103 billion. However, on a year-over-year basis, revenues (including deferrals) were down approximately 18%.

Quarterly Numbers

Excluding deferral revenues, Activision reported sales figure of $1.726 billion, up 18.6%. Revenues were driven by increasing digital revenues, overwhelming success of Overwatch and the buyout of King Digital Entertainment.

Segment-wise, Product sales were $509 million, down 21.1%, whereas subscription, licensing and other revenues grew 50.2% to $1.217 billion.

On the basis of distribution channels, Activision reported retail channel sales of $270 million (down 44% year over year) and digital online revenues of $1.386 billion (up 50%). Digital revenues contributed 80% of total revenue in the quarter. Other revenues grew 49% year over year to $70 million.

On a geographical basis, revenues from North America grew 23% to $929 million, while that from EMEA grew 6% to $554 million. Revenues from Asia Pacific grew 34% to $243 million.

On a non-GAAP (redefined) basis, operating income was $747 million compared with $621 million reported in the year-ago quarter.

The company had over 431 million monthly active users (MAUs) at quarter end.

Activision and Blizzard divisions' online player community MAUs were 48 million and 41 million, respectively. King Digital reported MAUs of 342 million due to the absence of any big releases.

Financial Position

Activision exited the quarter with $3.248 billion in cash and cash equivalents. Long-term debt was $4.393 billion. Operating cash flow for the quarter was $411 million.

Outlook

For 2017, Activision expects GAAP revenues of $6.1 billion and earnings per share of $0.88 against an earlier projection of revenues of $6 billion and earnings per share of $0.72. On a non-GAAP basis, revenues and earnings are expected to be $6.1 billion and $1.80 per share, respectively against an earlier projection of revenues of $6 billion and earnings per share of $1.70. Deferral revenues are expected around $230 million.

For second-quarter 2017, Activision anticipates GAAP revenues of $1.425 billion and earnings per share of $0.15. On a non-GAAP basis, revenues and earnings are likely to be $1.425 billion and $0.38 per share, respectively. Deferral revenues are expected to be around negative $225 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

Activision Blizzard, Inc Price and Consensus

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

VGM Scores

At this time, the stock has a nice Growth Score of 'B', however its momentum is lagging a bit with an 'D'. However, 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 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

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Activision Blizzard, Inc (ATVI): 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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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