Activision Blizzard Inc. ATVI posted third-quarter 2017 non-GAAP earnings of 47 cents, missing the Zacks Consensus Estimate of 50 cents. However, revenues (including deferrals) of $1.9 billion surpassedthe ZacksConsensus Estimate of $1.7 billion.
Quarterly Numbers
Excluding deferral revenues, Activision reported sales of $1.6 billion, up 3%. The top line continues to be driven by strength in digital revenues, Overwatch and the buyout of King Digital Entertainment. More importantly, Activision signed sponsorship deals with Hewlett-Packard and Intel.
Activision Blizzard, Inc Price, Consensus and EPS Surprise
Activision Blizzard, Inc Price, Consensus and EPS Surprise | Activision Blizzard, Inc Quote
Destiny 2 released on Sep 6, 2017 has fast emerged as a favourite with the players. Per NPD, Destiny 2 was the top selling game in September. The companyalso announced that Destiny 2 achieved a “new high watermark in digital full game downloads at over 50% of console sell-through.” With Destiny 2 released for PC gamers, Activision has statedthat the new game has outpaced the original Destiny in terms of consumer spend.
Activision earned $1 billion of in-game revenues in the quarter.
Segment wise, product sales were $384 million, up 8.2%, whilesubscription, licensing and other revenues grew 1.7% to $1.2 billion.
On the basis of distribution channels, Activision reported retail channel sales of $168 million (up 7% year over year) and digital online revenues of $1.35 billion (up 1%). Digital revenues contributed 84% of total revenuesin the quarter. Other revenues grew 43% year over year to $96 million.
On a geographical basis, revenues from North America were flat at $798 million, while that from EMEA grew 19% to $593 million. Revenues from Asia Pacific fell 17% to $227 million.
On a non-GAAP basis, operating income was $493 million compared with $542 million reported in the year-ago quarter.
Notably, Activision and a host of other video-game companies have changed the way of reportingtheir non-GAAP fiscal results to meet stricter guidelines imposed by the SEC. The company will no longer include the impact from revenue deferrals accounting treatment on certain online-enabled products.
The company had over 384 million monthly active users (MAUs) at quarter end, down 20.3% year over year.
Also, Activision and Blizzard divisions’ online player community MAUs were 49 million and 42 million, respectively. King Digital reported MAUs of 293 million, down 25.6% year over year due to the absence of any big releases.
Financial Position
Activision exited the quarter with $3.6 billion in cash and cash equivalents. Long-term debt was $4.4 billion. Operating cash flow for the quarter was $456 million.
Outlook
For 2017, Activision expects GAAP revenues of $6.8 billion and earnings per share of $1.22 compared with an earlier projection of revenues of $6.4 billion and earnings of $1.05. On a non-GAAP basis, revenues and earnings are expected to be $6.8 billion and $2.08 per share, respectively, against apreviousprojection of revenues of $6.4 billion and earnings of $1.94.
The Zacks Consensus Estimate for revenues and earnings is pegged at $6.8 billion and $2.14 per share, respectively.
For fourth-quarter 2017, Activision anticipates GAAP revenues of $1.7 billion and earnings per share of 10 cents. On a non-GAAP basis, revenues and earnings are likely to be $1.7 billion and 36 cents per share, respectively.
Zacks Rank & Stock Price Movement
At present, Activision carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Activision have registered impressive growth in the past year. The stock generated a return of 50.9%, outperformingthe industry’s gain of 33.4%.
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Other Stocks to Consider
Top-ranked stocks in the broader technology sector include NVIDIA Corporation NVDA Applied Materials AMAT, and Jabil Inc JBL. While NVIDIA Corp and Jabil sport a Rank #1, Applied Materials carriesa Zacks Rank#2 (Buy).
Long-term earnings growth rate for NVIDIA, Applied Materials and Jabil is currently projected to be 11.2%, 17.1% and 12%, respectively.
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