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Category: Stock Market and Activision Blizzard
Date: 4 September 2019 Stock Price: $51.06 We take a look at the 2nd 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 latest earnings report
The numbers we are interested in (for the quarter):
Segmental Revenues for Activision Blizzard Inc.
Segmental Operating for Activision Blizzard Inc.
Operating margins for the various segments of Activision Blizzard:
- Total net revenues: $1.396 billion (down from $1.641 billion for the same quarter of the previous year)
- Total costs and expenses: $1.060 billion (down from $1.207 billion for the same quarter of the previous year)
- Net income: $328 million (down from $402 million for the same quarter of the previous year)
- Weighted average common shares outstanding 766 million (up from 761 million shares for the same quarter of the previous year)
- Diluted earnings per common share $0.43 (down from $0.52 for the same quarter of the previous year)
- Cash and cash equivalents $ 4.592 billion
- Cash and cash equivalents per share: $5.99
- Cash and cash equivalents makes up 11.7% of Activision Blizzards current market capital
- Cash and cash equivalents makes up 26.24% of Activision Blizzards total assets
- Accounts receivable, net: $455 million
- Accounts receivable makes up 2.6% of the group's total assets
- Total shareholders’ equity: $11.977 billion
- Total shareholders equity per share: $15.63
- Cash flow: $154 million
- Cash flow per share: $0.21
Segmental Revenues for Activision Blizzard Inc.
- Activision: $268 million
- Blizzard: $384 million
- King: $499 million
Segmental Operating for Activision Blizzard Inc.
- Activision: $55 million
- Blizzard: $75 million
- King: $171 million
Operating margins for the various segments of Activision Blizzard:
- Activision: 20.5%
- Blizzard: 19.5%
- King: 34.26%
Activision Blizzard's management commentary on the results and earnings guidance
Santa Monica, CA – August 8, 2019 – Activision Blizzard, Inc. (Nasdaq: ATVI) today announced second-quarter 2019 results. “Our second quarter results exceeded our prior outlook for both revenue and earnings per share,” said Bobby Kotick, Chief Executive Officer of Activision Blizzard. “In the first half of 2019 we have prioritized investments in our key franchises and, beginning in the second half of this year our audiences will have a chance to see and experience the initial results of these efforts.”
Operating Metrics
For the quarter ended June 30, 2019, Activision Blizzard’s net bookingsB were $1.21 billion, compared with $1.38 billion for the second quarter of 2018. Net bookingsB from digital channels were $1.01 billion, as compared with $1.20 billion for the second quarter of 2018. Selected Business Highlights Activision Blizzard outperformed our second quarter outlook, reflecting strong creative and commercial execution as we continued to reposition the business for future growth. Across Call of Duty®, Candy Crush™, Warcraft®, Hearthstone®, Overwatch®, and Diablo®, we are expanding our development teams so that we can accelerate the delivery of content in our pipeline, pursue new business models, broaden our communities, and delight our players.
Audience Reach
The image below shows Activision-Blizzard's outlook for the rest of their 2019 fiscal year
Operating Metrics
For the quarter ended June 30, 2019, Activision Blizzard’s net bookingsB were $1.21 billion, compared with $1.38 billion for the second quarter of 2018. Net bookingsB from digital channels were $1.01 billion, as compared with $1.20 billion for the second quarter of 2018. Selected Business Highlights Activision Blizzard outperformed our second quarter outlook, reflecting strong creative and commercial execution as we continued to reposition the business for future growth. Across Call of Duty®, Candy Crush™, Warcraft®, Hearthstone®, Overwatch®, and Diablo®, we are expanding our development teams so that we can accelerate the delivery of content in our pipeline, pursue new business models, broaden our communities, and delight our players.
Audience Reach
- Activision Blizzard had 327 million Monthly Active Users (MAUs) C in the quarter.
- King had 258 million MAUsC. Candy Crush franchise MAUsC grew year-over-year, driven by growth in Candy Crush Saga™ and the addition of Candy Crush Friends Saga™.
- Activision had 37 million MAUsC. Call of Duty: Black Ops 4 MAUsC grew year-over-year versus Call of Duty: WWII, and hours played increased by more than 50%. Crash™ Team Racing: Nitro-Fueled enjoyed positive critical reviews and strong sales, particularly through digital channels.
- Blizzard had 32 million MAUsC. Hearthstone MAUsC grew quarter-over-quarter following the release of the Rise of Shadows™ expansion and The Dalaran Heist single-player Adventure. Overwatch MAUsC were relatively stable quarter-over-quarter, with engagement increasing following the release of the Workshop. Subscribers in World of Warcraft® increased since mid-May, following the release date announcement and beta for World of Warcraft Classic and the Rise of Azshara™ content update.
The image below shows Activision-Blizzard's outlook for the rest of their 2019 fiscal 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. Since then its been a mostly sideways moving stock price. But even with the issues they had towards the end of 2018, the stock price basically doubled over the last 5 years. While the group is about $12 from their 52 week low, they are about $33 away from their 52 week high. So this shows that the stock price over the last 12 months and in recent times have traded closer to their 52 week low than their 52 week high, so there is still some negative sentiment in the stock price.
Activision Blizzard's (NASDAQ: ATVI) latest stock valuation
Based on Activision Blizzard's latest earnings report our valuation models provides a target price for Activision Blizzard of $45.60 . This includes factoring in the group''s earnings guidance for the full fiscal year as well as assuming steady growth in their number of active users in the the next few years. We therefore believe that from a fundamental investing perspective that NASDAQ: ATVI does not offer value at its current price and we expect the stock to pull back to levels closer to our target (full value) price.