ATVI Stock: Here’s Why Activision Blizzard, Inc. Is Going Crazy Today

ATVI StockATVI Stock Surges 7% on Strong Earnings

Activision Blizzard, Inc. (NASDAQ:ATVI) stock surged seven percent in early Friday trading. The video game maker delivered strong first-quarter earnings and a better-than-expected full-year outlook, destroying most of the negative arguments put forward by the Activision stock bears in recent months.

Here are the five points you need to know:

1. Headline Numbers Were…Awesome

Analysts have generally believed Activision’s management had been sandbagging its guidance, intentionally low-balling its profit outlook to beat expectations.

Today’s report put that theory to rest. Adjusted revenues grew 29% year-over-year, coming in at $908 million. Much of those sales trickled down to the bottom line, with adjusted earnings per share growing 43% to $0.23.

2. King Digital Acquisition Is Paying Off

Activision purchased mobile game maker King Digital in late February for $5.9 billion. Analysts were worried management overpaid for the mobile game maker, as concerns lingered regarding whether Activision could recoup its investment. Today, those concerns have been put to rest.

King Digital is paying off right from the get-go. Last quarter, the mobile game maker added 23% of adjusted revenue. After adding in King’s gamers, Activision boasts it now has 544 million monthly active users.

3. Activision Is Finding New Revenue Streams

Executives are looking for new revenue streams. King Digital CEO Riccardo Zacconi said advertising could be a way for the company to squeeze more money out of gamers’ pockets. The company ditched the idea in 2013, but has recently begun experimenting with ads again in two of its games.

“Advertising could be a meaningful revenue stream for King in the long term,” Mr. Zacconi told analysts in the company’s conference call. “It is early days.”

4. In-game Purchases Are Becoming a Big Deal

In-game purchases are also becoming a cash cow for Activision. Last quarter, the company doubled its number of Call of Duty gamers who made in-game purchases. Revenue from content sold inside of Activision and Blizzard games rose 20% from a year earlier.

5. $1.75 Billion in Market Cap

The company bumped its full-year outlook. Management now expects $6.28 billion in adjusted revenue, up from $6.25 billion. Adjusted profits are expected to come in at $1.78 per share, up from $1.75.

Shareholders were clearly impressed. In early trading on Friday, ATVI stock surged 6.3% to $37.12. This move added $1.75 billion to the company’s market capitalization.