Earnings Preview: Activision Blizzard

Activision Blizzard, Inc (ATVI) is scheduled to report its Q2 2012 results on August 2, 2012, after the bell. The Street expects EPS and revenue of $0.12 and $831.79M, respectively.

In this article, I will recap the historical results of the company, its latest EPS estimates vs. surprises, the latest news from Activision Blizzard and the news from its closest competitors.

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Recent EPS Actuals vs. Estimates

The company has met or beaten analysts’ estimates in the last four quarters. In the last quarter, it reported $0.06 EPS, beating analyst estimates of $0.04.

The consensus EPS estimate is $0.12 based on 23 analysts’ estimates, up from $0.10 a year ago. Revenue estimates are $831.79M, up from $699.00M a year ago. The median target price by analysts for the stock is $15.00.

Average recommendation: Overweight

Source: Marketwatch

Analyst Upgrades and Downgrades

• On March 26, 2012, Stifel Nicolaus initiated Buy rating for the company.
• On February 10, 2012, Brean Murray reiterated Buy rating for the company.

Latest News

• On June 13, 2012, Activision Publishing, a wholly owned subsidiary of Activision Blizzard, Inc. announcedthat the company has formed a strategic relationship with Flurry Inc., to establish a new mobile publishing initiative that will identify and assist third-party developers in the development, publishing, distribution and promotion of independent titles on iOS and Android platforms.
• On June 1, 2012, Activision Blizzard announcedthat all parties to the litigation have reached a settlement of the dispute, the terms of which are strictly confidential.
• On May 16, 2012, Reuters reportedthat Activision Blizzard Inc and Electronic Arts Inc have settled a lawsuit in which Activision accused two former executives of breaking their employment agreements to develop games for EA. Neither company disclosed details of the settlement.
• On May 9, 2012, Activision Blizzard announcedthat for fiscal 2012, it expects GAAP net revenues of $4.200 billion, non-GAAP net revenues of $4.530 billion, GAAP earnings per diluted share (EPS) of $0.65 and non-GAAP EPS of $0.95. For second quarter of 2012, it expects GAAP net revenues of $950 million, non-GAAP net revenues of $805 million, GAAP earnings per diluted share of $0.13 and non-GAAP EPS of $0.10. According to I/B/E/S Estimates, analysts are expecting the Company to report revenue of $4.565 million and EPS of $0.97 for fiscal 2012; revenue of $822 million and EPS of $0.16 for second quarter of 2012.
• On March 5, 2012, Activision Blizzard announcedthat Microsoft veteran Dennis Durkin has been named Chief Financial Officer of the Company, reporting to Bobby Kotick, Chief Executive Officer.
• On February 9, 2012, Activision Blizzard announced that for first quarter of 2012, it expects GAAP net revenues of $965 million, Non-GAAP Net revenues of $525 million, GAAP earnings per diluted share of $0.22 and non-GAAP EPS of $0.03. For fiscal 2012, it expects GAAP net revenues of $4.150 billion, non-GAAP Net revenues of $4.500 billion, GAAP earnings per diluted share of $0.63 and non-GAAP EPS of $0.94. According to I/B/E/S Estimates, analysts on an average were expecting the Company to report revenues of $772 billion and EPS of $0.14 for first quarter of 2012; revenues of $4.550 billion and EPS of $0.96 for fiscal 2012.

Competitors

Electronic Arts (EA), Take-Two Interactive Software (TTWO), and Zynga (ZNGA) are considered major competitors for Activision Blizzard and the table below provides the key metrics for these companies and the industry.

The chart below compares the stock price changes as a percentage for the selected companies and S&P 500 index for the last one-year period.

ATVI data by YCharts

Competitors’ Latest Development

• On July 26, 2012, Newman Ferrara LLP and others announcedthat it has begun an investigation on behalf of shareholders of Zynga Inc (Zynga) into potential violations of federal securities laws and breaches of fiduciary duty by Zynga and certain of its officers.
• On July 25, 2012, Zynga Inc lowered fiscal 2012 guidance to reflect delays in launching new games, a faster decline in existing web games due in part to a more challenging environment on the Facebook web platform, and reduced expectations for Draw Something.
• On July 3, 2012, Funcom N.V. announcedthat the ‘The Secret World’ online game was officially launched worldwide On July 3, 2012. ‘The Secret World’ is developed by the Company and co-published by EA Partners, a division of Electronic Arts Inc.
• On June 26, 2012, Majesco Entertainment Co announcedthat it has entered into a publishing agreement with Zynga Inc. Under the agreement, Zynga will publish Mini Putt Park, Majesco’s latest social game.
• On June 20, 2012, Nokia Oyj announcednew partnership with Zynga Inc to bring Zynga’s games to Nokia Lumia smartphones and Windows Phones during autumn 2012, including Word with Friends and Draw Something.
• On May 22, 2012, Reuters reportedthat Zynga Inc has reached a partnership agreement with American Express to issue a prepaid debit card that could be used to redeem virtual credits.
• On May 16, 2012, Reuters reportedthat Activision Blizzard Inc and Electronic Arts Inc have settled a lawsuit in which Activision accused two former executives of breaking their employment agreements to develop games for EA. Neither company disclosed details of the settlement.
• On May 8, 2012, Dow Jones reported that Nokia Oyj announceda range of new partnerships aimed at delivering applications to its Lumia smart phones, including a cooperation deal with Rovio, the developer of the Angry Birds game series, as well as Groupon, Inc., PayPal and Electronic Arts, Inc. The deals are part of moves to establish third-party app-developer support for Microsoft Corp.’s Windows Phone platform, which it adopted last year in a strategy to replace its outdated Symbian operating system.
• On May 8, 2012, Reuters reported that Zynga Inc, the publisher of games on Facebook like “FarmVille” and “CityVille,” accused French game publisher Kobojo of trademark infringement, according to court documents.

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