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It has been about a month since the last earnings report for Activision Blizzard, Inc (ATVI). Shares have lost about 14.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Activision Blizzard, Inc due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Activision Q3 Earnings Up Y/Y on Solid Top-Line Growth
Activision Blizzard's third-quarter 2021 non-GAAP earnings of 89 cents per share increased 1.1% year over year.
Consolidated revenues increased 5.9% year over year to $2.07 billion. Adjusting for revenues from non-reportable segments, net effect from the recognition of deferred revenues and elimination of intersegment revenues, total revenues climbed 3.8% to $1.79 billion.
The Zacks Consensus Estimate for earnings and revenues was pegged at 71 cents per share and $1.88 billion, respectively.
For the quarter ended Sep 30, 2021, overall Monthly Active Users (MAUs) were 390 million, unchanged year over year.
Activision Blizzard’s net bookings increased 6.4% year over year to $1.88 billion. Net bookings from digital channels were $2.34 billion, up 24.5% year over year.
In-game net bookings were $1.20 billion, down 0.2% year over year.
Product sales (20.4% of revenues) were $423 million, up 3.7% year over year. In-game, subscriptions and other revenues (79.6% of revenues) increased 6.5% to $1.65 billion.
Based on distribution channels, Activision Blizzard reported retail channel sales of $69 million, down 41% year over year. However, digital online revenues of $1.85 billion were up 5.6% from the year-ago quarter. Other revenues surged 77.4% year over year to $149 million.
On the basis of platforms, revenues from mobile and ancillary (39.6% of revenues) rose 24.1% year over year to $820 million. PC revenues (27.9% of revenues) increased 12.5% year over year to $578 million. Revenues from console (25.3% of revenues) declined 24.7% year over year to $523 million.
On a geographic basis, revenues from the Americas (56.3% of revenues) climbed 3.5% year over year to $1.17 billion. Europe, the Middle East and Africa revenues (29.9% of revenues) were up 5.1% year over year to $619 million. Revenues from Asia Pacific (13.8% of revenues) increased 19.7% year over year to $285 million.
Activision (35.9% of revenues) revenues decreased 17.1% year over year to $641 million. The division had 119 million MAUs as of Sep 30, 2021 compared with 111 as of Sep 30, 2020.
Call of Duty Mobile net bookings grew over 40% year over year in the third quarter.
Blizzard (20.6% of revenues) revenues of $493 million increased 20% from the year-ago quarter. Blizzard had 26 million MAUs as of Sep 30, 2021 compared with 30 million as of Sep 30, 2020.
Segment revenue growth was driven by the successful launch of Diablo II: Resurrected.
King’s (36.5% of revenues) revenues of $652 million increased 21.6% year over year. MAUs were 245 million as of Sep 30, 2021, compared with 249 million as of Sep 30, 2020.
Product development expense increased 13.4% year over year to $297 million. Sales & marketing expenses were up1.3% year over year to $236 million.
However, general & administrative expenses were $121 million, down 18.2% year over year.
Total costs & expenses on a non-GAAP basis increased 7.2% year over year to $1.18 billion in the reported quarter.
On a non-GAAP basis, operating income was $824 million, up 5.9% year over year.
Balance Sheet & Cash Flow
As of Sep 30, 2021, cash and cash equivalents were $9.72 billion compared with $9.20 billion as of Jun 30, 2021.
Long-term debt as of Sep 30, 2021 was $3.61 billion, a slight increase compared with $3.60 billion as of Jun 30, 2021.
Operating cash flow increased 166% year over year to $521 million. Free cash flow jumped 190% year over year to $498 million.
On a trailing 12-month basis, free cash flow increased 45% to $2.81 billion.
For fourth-quarter 2021, Activision Blizzard expects non-GAAP revenues of $2.02 billion and earnings of 62 cents per share. Net bookings are expected to be $2.78 billion.
For 2021, Activision Blizzard anticipates non-GAAP revenues of $8.66 billion and earnings of $3.70 per share. Net bookings are expected to be $8.65 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
Currently, Activision Blizzard, Inc has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Activision Blizzard, Inc has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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