On Jul 5, we issued an updated research report on Activision Blizzard ATVI.
The company, one of the leading developers and publishers of console and online games, has been continuously drawing strength from its well-known franchises and engaging content releases.
The content addition makes it more attractive to players, increases its engagement levels and thereby leads to higher in-game purchases.
Notably, the company beat the Zacks Consensus Estimate in three of the trailing four quarters and matched the same in the remaining quarter. The company delivered an average positive earnings surprise of 27.98% and came up with a positive earnings surprise of 8.57% in the last reported quarter.
Moreover, shares of Activision have gained 34.7% in the past year, outperforming the industry’s 26.3% rally.
Popular Franchises Drive Top-Line Growth
Activision’s outperformance is primarily driven by its well-known franchises, which will continue to fuel top-line growth. It currently has eight franchises worth $1 billion. Call of Duty is one of the biggest growth drivers for the company. King Digital’s Candy Crush also continues to contribute significantly to the company’s revenues.
Notably, Call of Duty: WWII was the top-selling console video game in 2017 globally. The launch of Call of Duty: Black Ops 4 this October is expected to further driver user engagement.
We note that at the end of the last reported quarter, Activision had 51 million Monthly Average Users (MAU), up 7% year over year and 12% sequentially, driven by Call of Duty: WWII, Destiny 2 and Crash Bandicoot. Additionally, the company set a new first-quarter record of $1 billion in-game net bookings across its portfolio of franchises.
Improving User Engagement Positive
Moreover, the company is leaving no stone unturned to boost its user experience.
Last month, it announced the inclusion of a battle royale (BR) game mode called Blackout in Call of Duty: Black Ops 4. This is not only expected to boost Activision’s competitiveness against its traditional rivals but also Fortnite, a free game played by more than 45 million people worldwide. In September 2017, Epic Games introduced a BR mode for Fortnite on computers and gaming consoles.
Additionally, the company is strengthening its presence in the lucrative e-sports market and it also has a strong gaming lineup for the second half of the year.
However, the growing craze for Epic Games’ Fortnite is an overhang on Activision as we fear a decline in engagement levels.
Also, significant competition from the likes of Electronic Arts EA, Take Two Interactive TTWO and Glu Mobile GLUU is a concern.
Zacks Rank
Activision currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
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