In today’s market filled with incredible valuations, even earnings beats can result in steep selloffs. Today, such is the case for investors in Activision Blizzard (NASDAQ:ATVI) and ATVI stock.
To say Activision Blizzard has “taken an L” today is putting it mildly. Shares of ATVI stock opened down around 15% from yesterday’s close. At the time of writing, these losses have held, with investors appearing content to avoid buying the dip on this particular stock.
Indeed, Activision Blizzard has been dealing with a number of key headwinds of late.
In August, a sexual harassment lawsuit tied to a “frat boy” culture at the video game developer took ATVI stock on a downward spiral. This catalyst inspired a Securities and Exchange Commission (SEC) investigation into these allegations in September. And more recently, Activision Blizzard co-lead Jen Oneal decided to step down from her role, merely three months after taking over, in the wake of these allegations.
These concerns have plagued this stock for months, and ATVI stock has underperformed accordingly. However, let’s dive into what’s driving this marked decline in ATVI stock today.
ATVI Stock Down After Reporting Earnings Beat
- Today, ATVI stock saw its largest selloff since the Great Recession.
- This selloff came following the company’s third-quarter earnings report today.
- Indeed, when one looks at the actual numbers, this price action may lead to some head-scratching. Activision Blizzard’s revenue (actually, net bookings — a form of adjusted revenue) came in line with expectations.
- Adjusted earnings also beat the analyst consensus by a wide margin. The company reported 89 cents per share in adjusted earnings, versus estimates of 70 cents. So, what gives?
- Well, the company also announced delays for two of its key upcoming titles. Activision’s Overwatch 2 and Diablo IV games have been delayed, potentially into 2023.
- The company didn’t provide concrete timelines on these games but suggested that significant revenue or earnings from these games wouldn’t be likely next year.
- This letdown on forward-looking earnings has resulted in today’s selloff. Whether Activision can right the ship remains to be seen. However, for now, this company appears to be one with a lot of bearish momentum.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.