Take-Two And Activision Blizzard Diverge In Their Earnings Reactions

Take-Two, which reported its fiscal year first-quarter results after the market close last Wednesday rallied 12 percent Thursday before ending at $89.09.

Meanwhile, Activision Blizzard shares were down 2.83 percent at $62.16 intraday Friday after it released its second-quarter results after the close Thursday.

The Catalysts

Take-Two reported fiscal first-quarter revenue and adjusted earnings of $348.3 million and 41 cents, exceeding the guidance for $240 million–$290 million in revenues and 13–22 cents in earnings per share. The results were notably ahead of the consensus estimates, with "GTA Online" performing exceedingly well. "GTA Online" is the multi-player online version of the "Grand Theft Auto V" game.

The company also raised its fiscal year 2018 revenue guidance from $1.42 billion–$1.52 billion to $1.65 billion–$1.75 billion.

Meanwhile, Activision Blizzard reported second-quarter non-GAAP earnings of $0.55 per share on revenues of $1.63 million. Analysts, on average, had estimated earnings of 30 cents per share on revenues of $1.23 billion. The company said it had 407 million monthly active users in the quarter.

Looking ahead, the company guided to 2017 revenues of $6.40 billion and non-GAAP earnings per share of $1.94, which trails the consensus estimates that call for earnings of $2.02 per share and revenues of $6.54 billion.

See also: With Netflix-Like Service, Could Video Games Go The Way Of Blu-Rays?

What Spooked Activision Blizzard Shares?

Clearly, investors were put off by Activision Blizzard's soft guidance even as its rival could issue a strong one. This is despite the former successfully foraying into eSports. In July, the company announced plans to launch "Overwatch League" with city-based teams.

Another way to look at the downward move by Activision Blizzard stock is that it is giving back some of the gains it recorded on Thursday, as it moved in sympathy with Take-Two following its beat-and-raise quarter.

Both Activision and Take-Two have gained over 70 percent each in the year-to-date period, making them one of the standout performers thus far this year. Will the fundamentals continue to support the rally?

At time of publication, shares of Take-Two were up 3.06 percent at $90.39. Shares of Activision were up 1.14 percent at $62.72.