Market Overview

Mobile Monetization Makes Its Mark In Activision's Q3 Beat

Mobile Monetization Makes Its Mark In Activision's Q3 Beat
Related ATVI
10 Biggest Price Target Changes For Thursday
Benzinga's Top Upgrades, Downgrades For December 6, 2018
Activision -1.8% as Needham cuts estimates, price target (Seeking Alpha)

Digital and mobile monetization played a big role in Activision Blizzard, Inc. (NASDAQ: ATVI)'s third quarter earnings beat, Baird Equity Research's Colin Sebastian said in a research report.

The video game company reported a 17 percent year-over-year increase in its third quarter revenue to $1.9 billion after the close Thursday. The revenue number which came in higher than the $1.7 billion Sebastian was modeling. (See Sebastian's track record here.)

The outperformance can be attributed to digital downloads, which exceeded 50 percent of total sell-through — the highest mix in the company's history, according to Baird. In-game purchases exceeded $1 billion in revenue, which also marks the highest level ever and showcases the "increasingly recurring nature" of the business model, Sebastian said. 

Activision acquired King in 2015 and the segment delivered 15 percent year-over-year revenue growth in the quarter, the analyst said While King did see a quarter-over-quarter decline in monthly active users, the total number of paying players rose for the first time since the first quarter of 2016.

During a post-earnings conference call, Activision's management highlighted Friday's release of "Call of Duty WWII," which showed a higher mix of digital downloads for pre-orders versus all prior "Call of Duty" releases. This bodes well for the fourth quarter and sets up a scenario in which the company could report "significant upside" to management's "conservative" guidance, Sebastian said. 

Beyond the fourth quarter, ongoing advertising tests in the King mobile division are seeing strong results and a ramp in advertising could turn aggressive in 2018, the analyst said. The eSports segment could prove to be another growth opportunity ahead of the launch of the "Overwatch League" in January, which is backed by "high-profile sponsorships, providing some added legitimacy," according to Baird. 

Activision is one of Sebastian's top picks in the video game space due to a combination of industry-wide favorable trends and company-specific drivers and catalysts, including the "CoD WWII" release.

The analyst maintains an Outperform rating on Activision's stock and raised the price target from $68 to $75.

Related Links:

Activision, Take-Two Could See Disappointing Earnings Ahead

Barclays Likes EA, Take-Two Among Gamer Stocks

Photo courtesy of Activision.

Latest Ratings for ATVI

Dec 2018JP MorganUpgradesNeutralOverweight
Oct 2018KeyBancMaintainsOverweightOverweight
Oct 2018BarclaysUpgradesEqual-WeightOverweight

View More Analyst Ratings for ATVI
View the Latest Analyst Ratings

Posted-In: Activision Baird Equity Research Colin SebastianAnalyst Color Price Target Reiteration Analyst Ratings Tech Best of Benzinga


Related Articles (ATVI)

View Comments and Join the Discussion!

Latest Ratings

View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm. Licked Despite Q3 Beat, Increased Guidance

A Big Move Into A New Ex-U.S. ETF