Activision Blizzard smashes analysts’ expectations, raises forecast
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Activision Blizzard smashes analysts’ expectations, raises forecast

Market leading video game developer Activision Blizzard released second-quarter earnings results last week that dwarfed analysts’ expectations, as their hit title Overwatch continued to outperform with gamers. The company reported net income of $243 million, or $0.32 per share – up from $151 million, or $0.20 per share in the year-ago quarter. This is 41% higher than analysts forecast. Overall revenues fell by 11.9% to $1.42 billion, while analysts had expected them to fall to $1.23 billion – a reflection of the strong titles that debuted a year ago (Overwatch) and the fact that Activision Blizzard’s big releases this year are scheduled for the next two quarters.

Activision Blizzard’s share price is up by 72% year to date

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SOURCE: Yahoo Finance

As the graph above makes clear, this year has been all about video games. Activision Blizzard is up 72%, while rivals Take Two Interactive and Electronic Arts (both held in Dominion’s Ecommerce Fund) are up 78% and 50% respectively. As the sector continues to benefit from multiple powerful trends like eSports, digital downloads, and innovative new tech such as AR (Augmented Reality) and VR (Virtual Reality), video gaming is becoming more and more of a mainstream pastime.

Back to Activision Blizzard: perhaps most importantly to those who are interested in video gaming’s future, the company’s high-margin digital business, which lets players download and play games online, saw revenue rise by 14.7%. This is significant, as it is a far more efficient way for developers to get their games to customers, and many observers believe digital downloading is poised to become the standard way to game. Activision is leading the pack when it comes to creating that delivery system.

Activision saw success with its customers on almost all fronts – although it is hardly unique in this fact; people are simply playing more and more games each year. Blizzard now has 46 million monthly active users (up 39% from the previous year), and Activision has 47 million.

Unsurprisingly, the company raised its full year forecast again. It now expects full year adjusted profit of $2 per share, up from $1.88 per share, and adjusted revenue of $6.58 billion, up from $6.33 billion.

Disclosure

Dominion holds Activision Blizzard in its Global Trends Ecommerce Fund.


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