Shares in Activision Blizzard (ATVI) pulled back 2% in Tuesday’s after-hours trading, despite the video-gaming giant delivering a clean earnings beat.
Specifically, Q2 Non-GAAP EPS (including GAAP deferrals) of $0.97 beat Street estimates by $0.28 while GAAP EPS of $0.75 also topped Street expectations by $0.16.
Revenue came in at a whopping $2.08B, which beat consensus estimates by $380M, and represented an impressive 72% increase from the same quarter last year. Non-GAAP operating margin was 42% for the quarter, with Q2 operating cash flow at $768M.
Indeed, President and COO Daniel Alegre noted that Call of Duty in-game net bookings more than doubled from Q1 and were around 5 times higher than the year-ago quarter. “Each of our key franchises delivered better than expected results with growth led by the Call of Duty franchise, following the launch of Warzone” he commented.
In terms of users, ATVI reported Q2 overall monthly active users of 428M up from 407M in the previous quarter. This broke down into 125M users for Activision; 32M for Blizzard; and 271M for King Digital- vs 102M for Activision; 32M for Blizzard; and 273M for King Digital in the first quarter.
“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, CEO of Activision.
“In the second half of the year, we expect to launch major new content into key franchises with meaningfully larger audiences than we have seen previously, creating the opportunity for strong financial performance” he added.
Looking forward, for the third quarter, ATVI is guiding bookings of $1.65B- easily beating the consensus expectation of $1.4B, with bookings of $7.625B for the full year (vs consensus for $7.2B).
Shares in Activision have surged 45% year-to-date, and analysts have a bullish Strong Buy consensus on the stock’s outlook. However thanks to the recent rally the average analyst price target now indicates that shares could pull back 3% from current levels.
Needham’s Laura Martin has a buy rating on ATVI with a $90 price target (4% upside potential). “We believe video game play and viewing are beneficiaries of COVID-19 “shelter at home” rules, and that post-pandemic engagement levels will remain elevated compared to January 2020” she wrote.
“What we like most about ATVI’s strategic position is that it owns all if its IP and manages large, global, super-fan communities. Additionally, it has diverse revenue streams with big moats (ie, barriers to entry) based on hit franchises” she told investors. (See ATVI stock analysis on TipRanks).
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