by Ian Harvey
May 07, 2020
Activision Blizzard reported Tuesday and blew past estimates with 21% growth in net bookings on strong sales amid lockdowns.
And, Stock Options Made Easy “Earnings Predictions” Members are already up potential profits of 169% based on a CALL OPTIONS trade.
ATVI, publisher of games like “Call of Duty” and
“Overwatch,” reported its Q1 2020 earnings on Tuesday, with net bookings
jumping 21% year-over-year, as the company saw a significant spike in demand
amid lockdown orders during the coronavirus pandemic.
March was the first $10 billion month for videogame
sales in history, and NPD Group said U.S sales reached their highest March
level since 2008.
Activision Blizzard reported first-quarter net
income of $505 million, or 65 cents a share, compared with $447 million, or 58
cents a share, in the year-ago period. Adjusted for items such as stock-based
compensation, among other things, earnings were 76 cents a share.
Revenue fell to $1.79 billion from $1.83 billion in
the year-ago period; Activision reported net bookings rose to $1.52 billion
compared with $1.26 billion a year ago.
Activision Blizzard voiced confidence that any economic slowdown
will not massively change the trajectory for videogames, citing periods of
growth during that recession as well as an earlier one.
Activision Blizzard Chief Financial Officer Dennis Durkin noted that in the dot-com bust and the 2008 financial crisis, gaming spending continued to grow in the low- to mid-single digits.
“We think that’s driven by the lost cost of our gaming, which makes it a great value versus other forms of entertainment,” Durkin said in Tuesday’s conference call.
For the remainder of the year, Activision Blizzard said that they anticipated continuing with a full slate of releases, and executives did not mention delays related to specific titles in the conference call Tuesday evening.
The Recommended Trade Provided Monday.....
Video game stock Activision Blizzard, Inc. (NASDAQ:ATVI) will report earnings after the market closes. The consensus earnings estimate is $0.33 per share on revenue of $1.31 billion; but the Whisper number is better at $0.41 per share.
The company's guidance was for earnings of approximately $0.66 per share. Consensus estimates are for year-over-year earnings growth of 3.13% with revenue decreasing by 28.22%.
Short interest has decreased by 37.9% since the company's last earnings release.
Also, the company hasn't updated the guidance it previously issued during the fourth-quarter earnings call, which seems to suggest that the first quarter is tracking on schedule.
People around the world are turning to fan-favorite games like Assassin’s Creed and Prince of Persia to pass the time during lockdown, firmly placing gaming companies in the ‘buy’ column for some of the world’s most well-known fund managers.
Investment trust managers in the U.K. are tipping the industry as coronavirus-proof, as video games easily continue sales in this new reality that has negatively impacted other forms of entertainment, such as cinema and theater.
The total U.K. video games market, including buying software, consoles and online gaming, hit £5.35bn last year, according to figures published last week by the Association for U.K. Interactive Entertainment.
In the U.S., spending on video games in March rose 35% year-on-year to $1.6bn, while all video game categories experienced double-digit sales increases over the month, according to market research company The NPD Group.
And Activision Blizzard’s Call of Duty: Modern Warfare is in the top few.
Investment trust managers have argued that the gaming industry still has significant room to grow and with many of the stocks viewed as undervalued, they are seizing the opportunity to invest.
Activision Blizzard stock has very notable relative strength. When the markets are struggling, traders look for relative strength because they want stocks that are doing well vs. the rest of the market.
As the broader market remains under pressure, Activision has had a constant bid under its stock. That action is attractive to bulls, who would obviously rather own a stock that’s going up than a handful of others that are going down.
Activision is seeing a bump in sales and engagement due to the coronavirus. Obviously stay-at-home orders are forcing consumers to look at in-home entertainment options, as evidenced by Netflix’s (NASDAQ:NFLX) recent earnings report.
Video games are doing well. March 2020 sales were the best for the month since 2008. Hardware and software sales both experienced a jump, with game sales and consoles doing well.
With Activision Blizzard’s deep library of gaming content and leadership, expect the stock to keep on chugging higher over the long-term. In that realm, mobile will play a large role in the company’s future as well. As CEO Bobby Kotick said near the end of 2019, “We have 350 million users in 190 countries… I see no reason that number shouldn’t be 1 billion in five years.”
ATVI shares are up so far in 2020, higher by almost 12%. That comes at a time where the S&P 500 is down 13.3%, as the novel coronavirus causes an economic halt across the globe.
And with its cash-rich balance sheet, Activision is ideally positioned to ride out this downturn and take advantage of opportunities both during the quarantine and once the economy starts to open back up again.
Activision Blizzard saw massive gains in users for its “Call of Duty: Modern Warfare” title during the quarter, boasting its best unit sell-through outside of a launch quarter. Part of that is thanks to the company’s launch of “Call of Duty: Warzone,” a free-to-download title that not only generates revenue through in-game purchases, but can also funnel players to the full “Modern Warfare” title.
The company also reported strong gains in its “World of Warcraft” franchise with new, and, importantly, returning players joining the classic massively multiplayer role-playing game. “Overwatch,” the company’s team-based shooter game, also saw growth in the quarter.
At King, Activision Blizzard’s mobile arm, the company saw 75% year-over-year growth in net advertising bookings. Lockdowns may have also spurred “Candy Crush” players to play more game rounds in the title than at any time since the King acquisition in 2016.
The company says its development cycle is largely on track, thanks to the digital nature of the gaming business.
Activision Blizzard develops titles at
studios around the world and said in its earnings call that working remotely
adds “complexity and challenges” to aspects of game development. Specifically,
Activision Chief Operating Officer Daniel Alegre said that it makes creative
collaboration, motion capture and quality assurance, among other things, more
difficult. He said the company has taken measures to minimize the impacts and
the company continues to expect its slate of titles this year, including a
release of “Call of Duty” and a “World of Warcraft” expansion.
Expectations for the gaming giant was high heading into Tuesday’s earnings, with analysts’ average price targets heading higher. J.P. Morgan analyst Alexia Quadrani wrote in an April note that she expected gaming giants would experience high levels of engagement and sales amid the coronavirus pandemic, noting the Superdata report.
Activision shares are up 45% in the past year and rose 5.8% in
after-hours trading on Tuesday.
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An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!