In 2016, Activision Blizzard (ATVI, Financial) was headed in the upward direction, but the company’s downturn started in November after it reported third quarter results. The stock was down approximately 7% in the previous year.
However, the company reported robust third quarter results, as it shared EPS of 49 cents, 7 cents greater than the analyst estimates. The company’s revenue came in at $1.57 billion, in-line with the analyst estimates.
The main reason behind Activision’s downturn was the soft earnings guidance and reports of considerably less than expected sales for “Call of Duty: Infinite Warfare,” one of the Activision’s most significant gaming brands. Physical sales of “Call of Duty: Infinite Warfare” were down approximately 50% compared to the prior year’s franchise installment.
Activision launched “Overwatch” on May 23 and the game has performed amazingly well. Overwatch swiftly racked up an enormous player base and also won more “Game of the Year” awards compared to any other game released in 2016. Moreover, it has now turned into Activision’s one of the biggest franchises, similar to that of Call of Duty.
The company has been generating huge amount of cash via sales of additional digital content such as new story quests, weapons or character outfits that players purchase and download.
Most significantly, the company is on its way to launch the Overwatch League, which will allow the best Overwatch players to compete against each other. As per Reuters, the company will likely generate revenue from licensing teams, sponsoring and broadcasting.
In the mobile segment, the company introduced the World of Warcraft: Legion Companion App. With the help of this app, players can partake with certain in-game activities without the need of a PC. This is a new concept introduced by Activision Blizzard and appears to be a successful idea, as millions of players are using this app regularly.
Activision Blizzard is down approximately 13% from its 52-week high, but the stock has displayed some positive signs of growth heading into 2017. It has been a transitional year for Activision Blizzard in 2016, as the company has been busy in expanding its reach in mobile.
It looks like these transitions will start paying off this year, and investors should hold the stock for healthy returns.
Disclosure: No position.
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