Leading interactive entertainment company Activision Blizzard (ATVI, Financial) released fantastic results for the second quarter. The results were terrific, exceeding the company’s own expectations. Activision again justified its commitment for excellence by generating strong earnings and cash flows. Its games gained enough traction in their respective categories. Activision is still expecting a better gamer engagement, and it posted an upbeat guidance.
Good financials and prospects
Activision’s financials were good. In the recently reported quarter, the entertainment company posted revenue of $658 million, which was more than $608 million as compared to last year’s same quarter. Its digital channels were the major contributor to revenue, putting 73% in the total top line. However, on the earnings front, Activision posted EPS of $0.06 per share, which was slightly lower than $0.08 per share as compared to last year’s same quarter.
Activision is moving at an impressive pace. The company has continued delivering good results for the last 20 years. The company has a strong balance sheet, which will help it to gain further share in the market. It is evident that there are many conditions summing up in the favor of Activision, and the company is positioned to make the best of these opportunities.
Well-known games will drive growth
The gaming company sees good earnings growth in the coming quarter. Activision is counting on its strong digital channel, which was a key contributor to it in the last quarter. Its games –Â such as Call of Duty, Skylanders, World of Warcraft, Diablo, StarCraft and now Hearthstone –Â are doing well in their respective categories and are expected to take the digital sales to an entirely new level, driving more revenue.
It is strengthening its product portfolio as it has many exciting games lined up for launch. The company is counting on its game Destiny, which is going to be launched by September. Activision is seeing a positive feedback for the game. This can be quoted as the company’s beta test attracted about 4.6 million players. Further, Activision is expecting Destiny to become the biggest new IP launch in video game history by it.
Another important game is Call of Duty: Advanced Warfare. The company recently unveiled this game and is already seeing a positive response from gamers. The game has many improvements and attractive points. With this new exoskeleton, gamers can now boost jump, dodge, dash, slide, slam and more as the action goes vertical, while using future-tech, cutting-edge capabilities and a brand-new weapon class as a part of nearly 350 custom weapons.
In addition, Activision is also taking some impressive moves to attract more gamers. It has also announced a Day Zero edition of the game, offering fans for the first time 24-hour early access to the game. This will be available to the gamers at no added cost in the case of a preorder, and also users will be able to access two new custom weapons.
Also, under a rollout strategy with Tencent, Activision is trying to develop enough traction for its Call of Duty in China. In fact, the company is pleased with the increasing momentum as thousands of gamers in China will be playing a closed beta over the coming months. Considering this, Call of Duty online is a major opportunity to expand Activision’s reach, and to bring the franchise to a massive new player community. It also has plans with NetEase to bring Diablo III to Mainland China.
Conclusion
Activision is quite reasonable with a trailing P/E 25.92. Its forward P/E of 15.84 indicates earnings growth as well. In addition, it also has strong balance sheet, and its upcoming games are looking healthy. Considering all these aspects, Activision Blizzard is a great pick as of now.
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