ATVI Stock: Why Activision Blizzard, Inc. Shares Got Crushed Today

atvi stockActivision Blizzard, Inc. (NASDAQ:ATVI) posted buoyant third-quarter results, driven by the success of the team-shooter game Overwatch, but it wasn’t enough to impress ATVI stock traders.

In Q3, the company posted a 58% year-over-year jump in its revenue to $1.57 billion, exceeding its own revenue guidance of $1.49 billion forecasted in the last quarter.

The record Q3 performance was led by World of Warcraft: Legion and the ongoing success of Hearthstone and Overwatch (the fastest Blizzard game to reach 20 million players, and it remains the top game in South Korean gaming cafes), and the continued strength in Call of Duty in-game content. The company raised its full-year adjusted profit and revenue forecasts.

However, the robust Q3 performance failed to cheer the ATVI stock that tanked after trading hours. At the opening bell, shares of ATVI stock plunged over five percent in early trading.

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Although the revenues from the World of Warcraft-maker almost doubled year-over-year, part of its business, such as the Skylanders label, witnessed business stumbling 36% during the quarter.

The main highlights during the third quarter included big releases, such as World of Warcraft: Legion, Overwatch, the Hearthstone: Heroes of Warcraft digital card game, and King’s Candy Crush Saga on mobile.

Activision management said: “We continue to see enthusiasm from our global audiences for our key franchises including Call of Duty, Destiny, Candy Crush, and World of Warcraft, plus our newest franchise – Overwatch, which after only about four months had already reached over 20 million players and has incredible player engagement.”

They continued: “Looking forward, we expect continued momentum from all of our growth strategies, especially our esports initiatives and our integration of in-game advertising.”

ATVI stock has provided a robust fourth-quarter outlook with revenue of $1.86 billion, higher than last quarter’s forecast of $1.49 billion. But the company has lowered its per-share earnings guidance to $0.05 from $0.06, pointing to a shift in timing pertaining to debt-related costs.

Activision Blizzard also raised its full-year adjusted profit and revenue forecasts, and the company expects to close 2016 with a revenue forecast at $6.53 billion, from $6.48 billion, and its profit expectations at $2.02 per share, from $1.90. The bullish outlook stems from its slate of games for consoles, computers and mobile devices, stated Chief Financial Officer Dennis Durkin. “It’s based on the strong fundamentals of what we have inside the portfolio,” he said.

The company’s forecasts for Q4 is below the analysts’ estimates, due to the launch of games from the rival players during the crowded holiday quarter, which includes Electronic Arts Inc.’s (NASDAQ:EA) Battlefield 1 and Titanfall 2 shooter games, and Ubisoft Entertainment SA’s (EPA:UBI) Watch Dogs 2.

“Every holiday is very competitive, and this holiday will be no different,” said Durkin. “But we feel like we’ve got great momentum in our enduring franchises including Call of Duty and World of Warcraft, and early success in new franchises such as Blizzard’s Overwatch.”

The key point for ATVI stock is whether the fourth-quarter launch of Call of Duty: Infinite Warfare replicates the success of Overwatch and beats the competition. Only the time will tell.