Activision’s 3Q Profit Soars 132% On Strong Gaming Demand

Activision Blizzard’s 3Q adjusted EPS increased over two fold to $0.88 from the year-ago quarter, as the COVID-19 pandemic-led stay-at-home trend boosted gaming demand. However, shares of the video game publisher fell 1.3% in the extended trading session as its outlook for 4Q and full-year 2020 fell short of estimates.

Activision Blizzard (ATVI) forecast 4Q revenues and adjusted EPS of $2.001 billion and $0.63, respectively, lower than Street estimates of $2.61 billion and $1.09. For the full year, the company projects revenues and adjusted EPS of $7.675 billion and $3.08, respectively, which also fell short of analysts’ projections of $7.95 billion and $3.28.

Meanwhile, Activision Blizzard’s 3Q revenues surged 52% to $1.95 billion and surpassed the Wall Street forecast of $1.70 billion. The company’s MAUs (monthly active users), a key revenue metric, grew 23% to 390 million year-on-year mainly driven by strong performance at the Activision division which recorded MAU growth of 208%. Its King segment registered a marginal 0.8% increase in MAUs while the Blizzard unit recorded a 9% decline. (See ATVI stock analysis on TipRanks).

On Oct. 26, Wedbush analyst Michael Pachter reiterated a Buy rating and a price target of $104 (33.7% upside potential) saying that he expected the company to beat 3Q estimates. In a note to investors, Patcher had said: “Activision Blizzard could deliver outsized EPS growth from its strong pipeline and by scaling King ads, accelerating mobile, and retaining new and re-engaged players.”

Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 19 Buys and 2 Holds. With shares up nearly 39% year-to-date, the average price target of $97.16 implies a further upside potential of 24.9% to current levels.

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