Why Did Activision Blizzard End Up on Top?

Activision Blizzard won earnings season. Why did the company best Electronic Arts and Take-Two?

Feb 16, 2014 at 3:00PM

Shares of Activision Blizzard (NASDAQ: ATVI) have risen over 13% in the past week following positive fourth-quarter and full-year reports. The company is fresh off the launch of Call of Duty: Ghosts, which became the second best-selling game of the year behind Take-Two's (NASDAQ:TTWO) Grand Theft Auto V. The shares of Take-Two and Electronic Arts (NASDAQ:EA) fell after these companies' recent earnings reports as investors decide what to do with gaming companies now that the next-gen consoles have launched. How did Activision avoid a similar fate?  

Analysts estimated the company would report revenue of $2.2 billion for the fourth quarter and $4.3 billion for the year. Earnings per share estimates for the periods were $0.73 and $0.91, respectively. Activision Blizzard's fourth quarter included $2.3 billion in revenue along with EPS of $0.79, while the full-year result met on revenue and beat on EPS by three cents.  

Activision might have missed the top slot in game sales, but the company still has reasons to celebrate the year. 


Thriving franchises
The Call of Duty franchise in combination with World of WarcraftDiablo, and Skylander accounted for 80% of Activision Blizzard's revenue in 2012. That dependence likely deepened in 2013 with new game launches.   

Call of Duty: Ghosts has sold over 19 million units worldwide since its November release which earned the game the runner-up spot on NPD Group's list of the best-selling games of the year. However, that news wasn't surprising considering that Call of Duty games always perform well at launch and Activision engaged in a public numbers race with Take-Two, pitting Ghosts sales against those of Grand Theft Auto V

The surprising news from the quarter came from massively multiplayer online role-playing game World of Warcraft. Subscriber count for the game has declined slowly in recent years as new expansion packs failed to win over players. The game had around 7.6 million subscribers in the third quarter and this increased to 7.8 million in the fourth quarter. A new expansion was announced last fall and players continue to return in advance of its release. 

The real ace up Activision Blizzard's sleeve is the Skylanders series which combines video game play with add-on packs of toy-like character controls. The Skylanders games have achieved $2 billion in worldwide sales and sold about 175 million toys since the first title launched in 2011.    

What's next? 
For the near future, Activision simply plans to keep expanding its existing games while it has some fresh hit titles. Call of Duty: Ghosts will receive downloadable expansions through both the Xbox One and Xbox 360 of Microsoft before rolling out to other platforms. A new expansion pack for Diablo III arrives in March and World of Warcraft's announced expansion should come along soon. 

How'd the competition fare last year? 
Electronic Arts reported third-quarter revenue of $1.57 billion and EPS of $1.26. Analysts estimated the company would report $1.66 billion in revenue and EPS of $1.24. The company struggled with technical issues related to the launch of Battlefield 4, which caused delays that pushed the game into the fourth spot on the best-selling games list for that title and the general development pipeline. EA's next quarter will show the benefits -- or risks -- of the company's strong market share in early launch games for the Xbox One and the PlayStation 4 of Sony

Take-Two shares dove following the company's third-quarter report despite the record-breaking success of Grand Theft Auto V. The company reported fourth-quarter revenue of $767.7 and EPS of $1.70. Analysts had estimated the company would report revenue of $709 million and EPS of $1.40. The reason for Take-Two's share price drop could boil down to investors not having a warm attitude toward the company in general. Take-Two has Xbox One and PS4 games in development, but its current titles lean toward the older consoles and PC players. 

Foolish final thoughts 
Activision Blizzard ended 2013 on a high note thanks to the continued strength of two massively popular franchises -- Call of Duty and Skylanders -- and the surprise rebound of World of Warcraft. The company is well-positioned to keep expanding those franchises throughout this year. 

Want to get rich....on smartphones?
Truth be told, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access the "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

Brandy Betz has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard and Take-Two Interactive. The Motley Fool owns shares of Activision Blizzard. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers