Earnings Preview: Activision Blizzard
Video game publisher Activision Blizzard (NASDAQ: ATVI) is set to release its fiscal fourth quarter earnings results after the closing bell on Thursday, February 9. Wall Street analysts have consensus earnings per share estimates of $0.56 heading into the report. The low estimate is $0.54 with a high estimate of $0.58. In the year ago period, ATVI reported EPS of $0.53. Estimates taken from Estimize.com suggest that traders are looking for slight upside to Street consensus with users projecting that ATVI will report EPS of $0.57.
Estimize is a unique new tool which allows traders and investors to get a better idea of what the "whisper number," or real earnings expectations are for a company. The site does this by aggregating estimates from its users and generating a consensus EPS estimate based on this data.
Frequently, the "whisper number" is a better gauge of likely sentiment after the earnings numbers are released compared to Wall Street estimates which have a tendency to be on the conservative side. It is not uncommon to see a stock trade off sharply despite beating Street estimates if the numbers come up short of the whisper estimates.
Over the last 3 months, Wall Street earnings estimates have risen $0.03 from $0.53 to $0.56 for ATVI. During this time, the stock has fallen 9.32% despite a very strong broader market rally.
Going into the report, analysts have consensus revenue estimates for the quarter of $2.20 billion. The low estimate is $2.16 billion with a high estimate of $2.27 billion. In the year ago quarter, ATVI reported revenue of $2.55 billion.
Investors will be looking particularly hard at Activision's Q4 numbers because they are likely to account for a majority of the company's annual earnings and revenue due to the critical holiday shopping period. In fact, EPS for all of fiscal 2011 is expected to be around $0.86, with an estimated $0.56 of that coming in Q4. Likewise, fiscal 2011 revenue is anticipated to be $4.28 billion with $2.20 billion of that being registered in Q4.
Given the magnitude of this report, ATVI may be volatile in the wake of its Q4 earnings release. Over the last 52-weeks, ATVI has risen around 5.60%, including 9% in the last 6 months. On Tuesday, the shares have added 1.06% to $12.45. The 52-week range in ATVI has been between a low of $10.40 and a high of $14.40.
Going into the report, the stock is trading above both its 50-day moving average ($12.18) and its 200-day moving average ($12.13). If the shares begin to fall in after hours trading after the company releases its earnings, these two levels may serve as intermediate support. Activision trades at a trailing P/E of 19.85, a forward P/E of 13.10, and a PEG ratio of 1.18. The median Wall Street price target on the stock is $16.00 with a high target of $19.00.
