Activision Blizzard, Inc. Remains Bullish Heading into the Holiday Season

Activision Blizzard, Inc. Stock up 58% from March Lows

Videogame giant Activision Blizzard, Inc. (NASDAQ:ATVI) has been having a great year. And not just because people stuck at home due to the quarantine were spending lots of money on videogames, though that didn’t hurt.

Activision has also been expanding its iconic lineup of games and launching new titles.

All of this helped ATVI report second-quarter results that crushed Wall Street expectations.

It also helped Activision Blizzard stock reach new highs. ATVI stock is currently up 43.5% year-over-year and 33.3% year-to-date, and is up more than 58.0% since hitting March lows of $50.18.

While the video game bears out there believe the company’s strong financial results will experience a pull-back once everything returns to normal, the bears are hoping the strong sales fueled by the quarantine have formed long-term habits, leading to long-term, sustainable growth.

ATVI Stock Overview

It started innocently enough in 1979 with the videogame “Pitfall!”

Fast forward 41 years, and Activision Blizzard, Inc. has evolved into one of the biggest gaming companies on the planet, capturing an estimated four percent of the $150.0-billion gaming industry. (Source: “About Us,” Activision Blizzard, Inc., last accessed September 11, 2020.)

Each month, approximately 430 monthly active users (MAUs) from approximately 200 countries play any number of the company’s iconic titles. These include “Call of Duty,” “World of Warcraft,” “Overwatch,” “Hearthstone,” “Diablo,” “StarCraft,” “Heroes of the Storm,” “King’s Candy Crush,” “Bubble Witch,” and “Farm Heroes.”

In early September, the company announced the launch of “Tony Hawk’s Pro Skater 1” and “Tony Hawk’s Pro Skater 2.”

In late October, ATVI will be launching “World of Warcraft: Shadowlands,” the eighth expansion of the world’s most popular subscription-based multiplayer online role-playing game.

Q2 Results Crush Expectations

On August 4, Activision Blizzard, Inc. announced record results for the second quarter ended June 30, 2020.

Second-quarter revenue increased 37.8% year-over-year to $1.9 billion. Total MAUs across the company’s three divisions increased 30.8% to 428 million. (Source: “Activision Blizzard Announces Record Second-Quarter 2020 Financial Results,” Activision Blizzard, Inc., August 4, 2020.)

Second-quarter net income was $580.0 million, or $0.75 per share, a 76.8% increase over second-quarter 2019 net income of $328.0 million, or $0.43 per share.

“Our 400 million players continue to experience fun, joy and accomplishment through our games. Our record engagement resulted in greater revenue and earnings per share than previously forecast,” said Bobby Kotick, Activision’s CEO.

“While economic uncertainty could have an impact on our near-term results, the initiatives that drove our growth for the first half of the year should also provide the foundation for long-term growth.”

ATVI’s Business Outlook

Going forward, Activision Blizzard, Inc. raised its guidance for net revenue and earnings per share (EPS) for the year.

Total net revenue is expected to be $7.27 billion, a year-over-year increase of 12.0%. And the company anticipates EPS of $2.46, a 26% increase over 2019 EPS of $1.95.

For the third quarter, ATVI expects to report:

• Net revenue of $1.8 billion, compared to $1.3 billion in Q3 2019
• EPS of $0.64 vs. $0.26 in the same period last year

Analyst Take

Activision Blizzard, Inc. is an excellent videogame stock that was doing well before the coronavirus pandemic. It’s doing even better now. The company reported better-than-expected second-quarter results and raised its third-quarter and full-year guidance. Earnings for the third quarter are expected to more than double year-over-year. This, coupled with the launch of new games and what is expected to be a strong holiday season, should be good news for Activision Blizzard, Inc. bulls.