Market Overview

Activision Had A 'Huge, Huge Revenue Beat,' But Is A Correction Coming?

Activision Had A 'Huge, Huge Revenue Beat,' But Is A Correction Coming?

Activision Blizzard, Inc. (NASDAQ: ATVI) beat earnings with a Q2 EPS of $0.13 (versus the Street estimate of $0.08) and sales of $1.04 billion. The firm raised its CY15 sales estimates from $4.425 billion to $4.6 billion, topping the Street's current estimate of $4.47 billion. Activision also raised its CY15 EPS to $1.30 versus $1.23.

"They had a whopper," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. "Huge, huge revenue beat. They have a really nice multi-pronged model."

Despite his praise, Udall referred to Activision as a "weird stock" that almost provides a "lesson in portfolio management."

"Here's the biggest problem with the stock: it tends to sit sideways and be very flat and go nowhere," he said. "It doesn't generate very many trades. Almost all the trades are catalyst-driven trades around the time of an earnings report."

Udall said analysts have to take on a lot of risk because the stock could either go up or down on earnings, but it won't move on much else.

"This is one where they've been hitting and the earnings reports have been hitting," he said. "But this is a tough stock to trade because you will literally have three- to four-month periods where the stock doesn't move more than $1.50. Maybe $2 at the most, so it's hard to generate trades from it. It's kind of a quiet stock away from earnings."

Related Link: Will Destiny Be The Biggest Game Launch In History?

Udall "can't believe how high that stock is trading now," but he said it belongs to another group that has not corrected yet. That group includes Electronic Arts Inc. (NASDAQ: EA) and Take-Two Interactive Software, Inc. (NASDAQ: TTWO), both of which are trading up this year.

"We'll see if that can continue," Udall added. "The next big title is probably going to be 'Star Wars'-related. This could put a crimp in some of the other companies."

All of the new "Star Wars" games -- including "Star Wars: Battlefront" -- are being developed by Electronic Arts.

As for Activision, Udall is looking ahead to the next generation.

"Imagine what these guys could do if we get a VR-type system in the future," he said.

More Durable Than Zynga

Global Equities Research analyst Trip Chowdhry had high praise for Activision.

"I think this is a durable company," Chowdhry told Benzinga. "It's not like Zynga, which was built on concepts. It's a durable business. It's not a fly-by-night like many companies that came into being [recently]."

Chowdhry said a correction could happen but believes that would offer a buying opportunity to investors.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Latest Ratings for ATVI

Oct 2020KeyBancMaintainsOverweight
Oct 2020BMO CapitalDowngradesOutperformMarket Perform
Aug 2020CitigroupMaintainsNeutral

View More Analyst Ratings for ATVI
View the Latest Analyst Ratings


Related Articles

View Comments and Join the Discussion!

Posted-In: ActivisionAnalyst Color Short Ideas Top Stories Analyst Ratings Movers Tech Trading Ideas Best of Benzinga

Latest Ratings

AYLANoble Capital MarketsInitiates Coverage On29.0
SHOPSusquehannaInitiates Coverage On950.0
SICraig-HallumInitiates Coverage On50.0
WORKStephens & Co.Downgrades
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at