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Category: Stock Market and Activision Blizzard
Date: 10 November 2019 Stock Price: $54.30 We take a look at the 3rd quarter earnings report of their 2019 fiscal year interactive entertainment company Activision Blizzard, owners of Call of Duty, Candy Crush and World of Warcraft
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About Activision Blizzard Inc.
Activision Blizzard, Inc., a member of the Fortune 500 and S&P 500, is a leading standalone interactive entertainment company. We delight hundreds of millions of monthly active users around the world through franchises including Activision's Call of Duty®, Spyro™, and Crash™, Blizzard Entertainment's World of Warcraft®, Overwatch®, Hearthstone®, Diablo®, StarCraft®, and Heroes of the Storm®, and King's Candy Crush™, Bubble Witch™, and Farm Heroes™. The company is one of the Fortune "100 Best Companies To Work For®." Headquartered in Santa Monica, California, Activision Blizzard has operations throughout the world. More information about Activision Blizzard and its products can be found on the company's
Financial overview of Activision Blizzard's 3rd quarter 2019 earnings report
The data below refers to the latest quarter unless specified otherwise:
Segmental Revenues for Activision Blizzard Inc. for 3rd quarter 2019
Segmental Operating Income for Activision Blizzard Inc.for 3rd quarter 2019
Operating margins for the various segments of Activision Blizzard for 3rd quarter 2019
- Total net revenues: $1.282 billion (down from $1.512 billion for the same quarter of the previous year)
- Total costs and expenses: $1.035 billion (down from $1.247 billion for the same quarter of the previous year)
- Net income: $204 million (down from $260 million for the same quarter of the previous year)
- Weighted average common shares outstanding 767 million (up from 763 million shares for the same quarter of the previous year)
- Diluted earnings per common share $0.26 (down from $0.34 for the same quarter of the previous year)
- PE ratio of Activision Blizzard: 27.4
- Cash and cash equivalents $ 4.939 billion
- Cash and cash equivalents per share: $6.49
- Cash and cash equivalents makes up 11.8% of Activision Blizzards current market capital
- Cash and cash equivalents makes up 27.73% of Activision Blizzards total assets
- Accounts receivable, net: $386 million
- Accounts receivable makes up 2.1% of the group's total assets
- Goodwill in Activision Blizzard: $9.764 billion
- Goodwill per share: $12.73
- Goodwill makes up 54.8% of Activision Blizzard's total assets
- Total shareholders’ equity in Activision Blizzard: $12.235 billion
- Total shareholders equity per share: $15.95
- Activision Blizzard is trading at 3.3 times its stockholders equity which is within the expected range of between 2 and 4 time that most firms tend to trade at.
Segmental Revenues for Activision Blizzard Inc. for 3rd quarter 2019
- Activision: $209 million
- Blizzard: $394 million
- King: $500 million
Segmental Operating Income for Activision Blizzard Inc.for 3rd quarter 2019
- Activision: $26 million
- Blizzard: $74 million
- King: $184 million
Operating margins for the various segments of Activision Blizzard for 3rd quarter 2019
- Activision: 12.44%
- Blizzard: 18.78%
- King: 36.8%
Activision Blizzard's management commentary on their 3rd quarter 2019 earnings report
SANTA MONICA, Calif.--(BUSINESS WIRE)--Nov. 7, 2019-- Activision Blizzard, Inc. (Nasdaq: ATVI) today announced third-quarter 2019 results.
“Our third quarter results exceeded our prior outlook for both revenue and earnings per share,” said Bobby Kotick, Chief Executive Officer of Activision Blizzard. “Recent launches have enabled significant growth in the size of our audiences for our Call of Duty® and World of Warcraft® franchises. As we introduce mobile and free-to-play games based on our franchises we believe we can increase audience size, engagement and monetization across our wholly owned franchises. With a strong content pipeline and momentum in mobile, esports and advertising, we are confident we will remain a leader in connecting and engaging the world through epic entertainment.”
“Our third quarter results exceeded our prior outlook for both revenue and earnings per share,” said Bobby Kotick, Chief Executive Officer of Activision Blizzard. “Recent launches have enabled significant growth in the size of our audiences for our Call of Duty® and World of Warcraft® franchises. As we introduce mobile and free-to-play games based on our franchises we believe we can increase audience size, engagement and monetization across our wholly owned franchises. With a strong content pipeline and momentum in mobile, esports and advertising, we are confident we will remain a leader in connecting and engaging the world through epic entertainment.”
Operating Metrics
For the quarter ended September 30, 2019, Activision Blizzard’s net bookingsB were $1.21 billion, compared with $1.66 billion for the third quarter of 2018. Net bookingsB from digital channels were $0.98 billion, as compared with $1.44 billion for the third quarter of 2018. In-game net bookings were $0.71 billion. Overall Activision Blizzard Monthly Active Users (MAUs)D were 316 million.
Selected Business Highlights
Activision Blizzard exceeded its third quarter outlook, driven by better-than-expected performance for Call of Duty in-game and World of Warcraft, as well as favorable cost timing. The company started the fourth quarter with successful launches for Call of Duty®: Mobile and Call of Duty®: Modern Warfare, and achieved important milestones for several other franchises. Activision Blizzard is intent on building on this momentum as the company invests in the fourth quarter to maximize the potential of its franchises in 2020 and beyond.
Activision
Blizzard
For the quarter ended September 30, 2019, Activision Blizzard’s net bookingsB were $1.21 billion, compared with $1.66 billion for the third quarter of 2018. Net bookingsB from digital channels were $0.98 billion, as compared with $1.44 billion for the third quarter of 2018. In-game net bookings were $0.71 billion. Overall Activision Blizzard Monthly Active Users (MAUs)D were 316 million.
Selected Business Highlights
Activision Blizzard exceeded its third quarter outlook, driven by better-than-expected performance for Call of Duty in-game and World of Warcraft, as well as favorable cost timing. The company started the fourth quarter with successful launches for Call of Duty®: Mobile and Call of Duty®: Modern Warfare, and achieved important milestones for several other franchises. Activision Blizzard is intent on building on this momentum as the company invests in the fourth quarter to maximize the potential of its franchises in 2020 and beyond.
Activision
- In the third quarter of 2019:
- Activision had 36 million MAUsD.
- Call of Duty®: Black Ops 4 reach and net bookings from in-game items grew sharply versus Call of Duty®: WWII in the third quarter of 2018.
- The October 1, 2019, launch of Call of Duty: Mobile saw over 100 million downloads in its first month, reaching the top of the mobile app download charts in over 150 countries and regions, with a 4.9-star rating in the U.S. iOS store.1
- On October 25, 2019, Call of Duty: Modern Warfare launched and became the top-selling new premium game release of the year. In its first week, sell-through units grew a high-teen percentage versus Call of Duty: Black Ops 4, with strong console growth and PC units on Battle.net® reaching new highs.
Blizzard
- In the third quarter of 2019:
- Blizzard had 33 million MAUsD.
- World of Warcraft® Classic drove the biggest quarterly increase to subscription plans2 in franchise history, in both the West and East.
- The Overwatch League™ concluded with a sell-out crowd of over 11,000 fans watching the San Francisco Shock defeat the Vancouver Titans in the Grand Finals at the Wells Fargo Center in Philadelphia in September. Season Two average minute audience grew 18% year-over-year.3
- At BlizzCon on November 1, 2019, Blizzard revealed some of the exciting content in its pipeline:
- Hearthstone®’s Descent of Dragons™ expansion, set for release in the fourth quarter of 2019, and the new Battlegrounds auto-battler mode, which is already in early access and enters open beta on November 12, 2019,
- World of Warcraft’s next expansion, Shadowlands, set to launch in 2020,
- Overwatch® 2, the next major installment for the franchise, and
- Diablo® IV, the highly-anticipated sequel to the genre-defining franchise.
- In the third quarter of 2019:
- King had 247 million MAUsD.
- Candy Crush™ franchise mobile reach grew year-over-year, driven by the addition of Candy Crush Friends Saga™ which launched in October 2018.
- Candy Crush was once again the top-grossing franchise in the U.S. mobile app stores.1
- Advertising continued to grow profitably, with net bookings almost doubling year-over-year.
Activision Blizzard's (NASDAQ: ATVI) stock price history
The image below, obtained from Google shows the stock price history of Activision Blizzard over the last 5 years. And while its been a mostly upward trend in the stock price of the group there was a significant decline towards the end of 2018, largely brought on by China delaying the release of new games in their markets. 5 years ago the stock of Activision Blizzard was trading at around $20 a stock and its currently trading at $54.30. That's a very healthy return of 172% provided to Activision Blizzard stockholders over the last 5 years.
The stock of Activision Blizzard is trading at closer to its 52 week high of $65.40 than it is to its 52 week low of $39.85 which to us is an indication that the short term sentiment and momentum of Activision Blizzard's stock is positive at this point in time
The stock of Activision Blizzard is trading at closer to its 52 week high of $65.40 than it is to its 52 week low of $39.85 which to us is an indication that the short term sentiment and momentum of Activision Blizzard's stock is positive at this point in time
Recent coverage of Activision Blizzard
The extract below covers the latest earnings report of Activision Blizzard as obtained from TheStreet.com
Activision Blizzard (ATVI - Get Report) reported earnings after the bell Thursday night. The video game maker indicated softer current-quarter revenue guidance that overshadowed stronger-than-expected earnings for the three months ending in September, reported TheStreet's Tony Owusu. The Santa Monica-based company reported adjusted earnings of 38 cents per share on revenue of $1.21 billion. Analysts were expecting the company to report earnings of 23 cents per share on revenue of $1.16 billion. However, the stock is falling after the company said that it expects net revenue of $2.65 billion. Analysts are expecting the company to report revenue of $2.75 billion in the holiday quarter.
"Our third-quarter results exceeded our prior outlook for both revenue and earnings per share," said CEO Bobby Kotick. "Recent launches have enabled significant growth in the size of our audiences for our Call of Duty and World of Warcraft franchises." In a note, Barclays said, "The 3Q strength was driven by Call of Duty (CoD) in-game revenue and the surge of subscriptions lead by World of Warcraft (WoW) Classic, which had the most q/q subscriber net adds in its 15-year franchise history."
Read the full article here
Activision Blizzard (ATVI - Get Report) reported earnings after the bell Thursday night. The video game maker indicated softer current-quarter revenue guidance that overshadowed stronger-than-expected earnings for the three months ending in September, reported TheStreet's Tony Owusu. The Santa Monica-based company reported adjusted earnings of 38 cents per share on revenue of $1.21 billion. Analysts were expecting the company to report earnings of 23 cents per share on revenue of $1.16 billion. However, the stock is falling after the company said that it expects net revenue of $2.65 billion. Analysts are expecting the company to report revenue of $2.75 billion in the holiday quarter.
"Our third-quarter results exceeded our prior outlook for both revenue and earnings per share," said CEO Bobby Kotick. "Recent launches have enabled significant growth in the size of our audiences for our Call of Duty and World of Warcraft franchises." In a note, Barclays said, "The 3Q strength was driven by Call of Duty (CoD) in-game revenue and the surge of subscriptions lead by World of Warcraft (WoW) Classic, which had the most q/q subscriber net adds in its 15-year franchise history."
Read the full article here
Activision Blizzard's (NASDAQ: ATVI) latest stock valuation
Based on Activision Blizzard's latest earnings report and the fiscal guidance what do we value the group's stock at? Based on reported earnings and the fiscal guidance provided our valuation models provides a target (full value) price for Activision Blizzard of $46.10 (up slightly from our 2nd quarter 2019 earnings report valuation of Activision Blizzard). We therefore believe the stock of Activision Blizzard is overvalued.
We usually recommend that long term fundamental or value investors enter a stock at least 10% below our target (full value) price which in this case is $46.10. We therefore believe a good entry point into Activision Blizzard stock is at $41.50 or below. We expect the stock of Activision to pull back from its current levels to levels closer to our target (full value) price in coming weeks and months.
We usually recommend that long term fundamental or value investors enter a stock at least 10% below our target (full value) price which in this case is $46.10. We therefore believe a good entry point into Activision Blizzard stock is at $41.50 or below. We expect the stock of Activision to pull back from its current levels to levels closer to our target (full value) price in coming weeks and months.
Next earnings release of Activision Blizzard
It is expected that Activision Blizzard's 4th quarter 2019 earnings report will be released towards the middle of February 2020