Is Activision Blizzard Stock Worth Buying After Its Earnings Surprise?

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Activision Blizzard (NASDAQ:ATVI) recently posted a significant earnings beat that bolstered Activision Blizzard stock to new one-year highs. But while the company presented a strong report, we must question whether this strength is likely to continue in the months ahead.

Is Activision Blizzard Stock Worth Buying After Its Earnings Surprise?

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There are several reasons for optimism and also some concerns looming. So with that in mind, let’s dive a little deeper into whether the stock is worth considering.

Reasons to Be Bullish

On top of the strong earnings report last week, there are several other prospects that may help boost Activision Blizzard stock. Some of these include upcoming video game releases and new consoles from Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT) during the holiday season.

More specifically:

• Several of the company’s video game releases in 2020 should help boost sales. For example, Call of Duty 2020 (official title still to be determined) is a strong contender. The Call of Duty franchise is a proven powerhouse, with sales of the latest iteration increasing significantly over 2018’s release.

Call of Duty: Mobile also demonstrated impressive strength. Speaking of the game, CEO Robert Kotick boasted that they “grew … [their] player base from 40 million to 100 million players in less than a year.” He expects continued growth for the entire franchise this year.

• The growth prospects of other existing franchises also continue to demonstrate long-term potential. For example, Activision Blizzard reported that World of Warcraft “ended 2019 with more than twice the amount of active players than it had at the end of the second quarter.”

• The success of Call of Duty: Mobile could lead to the mobile expansion of other popular titles in the franchise and throughout the company’s library more broadly. For example, the massively popular Overwatch franchise might see a mobile iteration. At the very least, it indicates greater acceptance of mobile gaming from fans of “hardcore” franchises like Call of Duty.

• With the debut of each of its new releases at popular video game events like E3 and BlizzCon, investors might enjoy short-term gains from the subsequent hype. Furthermore, the hype could amplify with the debut of the new Xbox and PlayStation consoles at the end of the year.

Bottom Line on Activision Blizzard Stock

Although there are plenty of reasons to be optimistic about Activision Blizzard in 2020, there are also a few reasons for concern. A couple examples: its inclination toward controversy, or the fact that some of the above prospects are more speculative than guaranteed.

Right now, no one truly knows what to expect from the company’s line-up for next-generation consoles. However, what Activision Blizzard has demonstrated is an ability to continually grow already massive franchises and continue to boost its revenue as a result.

But I still think it might be a little too soon to hit the buy button.

Some analysts aren’t as optimistic despite the positive report, and they offer compelling reasons to question whether the company can maintain its unexpected strength. For example, some expect the company’s growth narrative to diminish, falling to 4.4% rather than the typical 10%. And several analysts reduced their overall earnings-per-share estimates for 2020 despite the latest earnings beat.

It’s possible that while the company managed to surprise investors with these results, Activision Blizzard stock doesn’t have much more room to run. At least for now. Its future successes may not be as compelling as its latest earnings beat, and its growth story could lose its luster going forward.

Right now, I suggest keeping a close eye on the company. Once we learn what its plans are for the next batch of consoles, then it might be worth hopping aboard the hype train.

Robert Waldo has been a web editor for InvestorPlace since 2016. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/02/is-activision-blizzard-stock-worth-buying-after-its-earnings-surprise/.

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