Activision Blizzard, Inc. Bulls Step in on New Developments
Activision Blizzard, Inc. (NASDAQ:ATVI) shares have not exactly been on a tear this year. From January to the end of August, Activision Blizzard stock advanced a respectable 12%, but was down approximately 30% year-over-year.
All that changed though at the start of September, after the video game giant announced its plans to bolster its core products Call of Duty and World of Warcraft, and announced that Overwatch was coming to “Nintendo Switch.”
Investors liked what they were hearing. Since the start of September, ATVI stock soared more than 12%, hitting a year-to-date intra-day high of $56.60 on September 5. This placed the stock up an even more respectable 26% year-to-date.
News of developments with Activision’s core games is welcome news to investors, who have, over the past year, seen the company’s revenues and earnings slide. In August, the company reported better-than-expected—but still lackluster—second-quarter results.
The company is also working through previously announced restructuring efforts that include laying off about eight percent of its staff, or 800 employees. The cash saved by laying off those from “non-development roles” will be reinvested into current and future game development.
All this has put Activision Blizzard stock on a new growth trajectory. The company is currently trading at $55.28, but thanks to these new developments, a 12-month share price forecast of $77.00 seems appropriate. That represents a 39% gain.
ATVI Stock Overview
Activision Blizzard is the most successful standalone interactive entertainment company on the planet.
The company has five operating units: Activision Publishing, Blizzard Entertainment, Activision Blizzard Studios, King Digital Entertainment, and Major League Gaming. (Source: “Our Company,” Activision Blizzard, Inc., last accessed September 5, 2019.)
Every month, approximately 500 million users in 196 countries play any number of the company’s games. Some of their most popular titles are Call of Duty, Candy Crush, Hearthstone, Overwatch, and World of Warcraft. Other titles are always in the works.
|ATVI Stock Information|
|Market Cap||$39.2 Billion|
|Shares Outstanding||767.0 Million|
|50-Day Moving Average||$48.72|
|200-Day Moving Average||$46.33|
(Source: “Activision Blizzard, Inc. (ATVI),” Yahoo! Finance, last accessed September 9, 2019.)
Overwatch Launches on Nintendo Switch October 15
On September 4, investors were pleased to hear that Blizzard Activision was making the Overwatch Legendary Edition available on Nintendo Switch. Over 40 million gamers already play the sci-fi game on other machines. (Source: “Fight For The Future On Nintendo Switch – Overwatch Legendary Edition Arrives October 15,” Activision Blizzard, Inc., September 4, 2019.)
At 40 million players, it may not be a total surprise to hear that the game has its own professional esports league, “Overwatch League.” In July 2018, Activision announced that Overwatch League events will be broadcast live on ESPN in primetime slots. (Source: “ESPN, Disney XD And Blizzard Entertainment Announce Multiyear Exclusive Telecast Agreement For Overwatch League,” Activision Blizzard, Inc., July 11, 2018.)
New Free Chapter of Hearthstone Launches September 15
On September 3, Blizzard Activision announced it would be making the latest expansion of its popular Hearthstone game, Tombs of Terror, free to everyone on September 17. (Source: “Delve Into The Deadly Tombs Of Terror In Hearthstone’s Next Solo Adventure,” Activision Blizzard, Inc., September 3, 2019.)
Hearthstone is a free-to-play collectible card game with more than 100 million players. Three additional chapters will be released over the coming weeks. Those will not be free to play.
Better-Than-Expected Q2 Results
On August 8, Activision Blizzard announced that its revenue for the second quarter ended June 30 fell 14.6% year-over-year to $1.4 billion. Despite the tumble, it beat the company’s previous second-quarter revenue guidance of $1.3 billion. (Source: “Activision Blizzard Announces Second-Quarter 2019 Financial Results,” Activision Blizzard, Inc., August 8, 2019.)
Second-quarter earnings per share (EPS) were $0.43, a 17.3% drop from the $0.52 per share in the second quarter of 2018. Previous second-quarter 2019 EPS guidance was $0.21.
Adjusted EPS for the second quarter of 2019 came in at $0.53, a 14.5% drop from the $0.62 recorded in the same prior-year period. The company had announced a prior adjusted EPS outlook of $0.35.
“Our second quarter results exceeded our prior outlook for both revenue and earnings per share,” said Bobby Kotick, CEO.
“In the first half of 2019 we have prioritized investments in our key franchises and, beginning in the second half of this year our audiences will have a chance to see and experience the initial results of these efforts.”
Activision Blizzard, Inc. has had a tough year, but restructuring efforts and investments in its flagship products like World of Warcraft and Call of Duty should help improve the company’s bottom line and juice its share price over the next few quarters.
Chances are good that Activision Blizzard stock will experience some near-term volatility before launching higher. Activision expects its full-year 2019 revenue to fall by 17.5% and its adjusted earnings per share to fall by 25.7%.
But 2020 should be an entirely different year for Activision Blizzard and its shareholders.