What: Shares of Activision Blizzard, Inc. (NASDAQ:ATVI) jumped an impressive 13.9% in May, according to data provided by S&P Global Market Intelligence, after the company reported better-than-expected earnings.
So what: First quarter non-GAAP revenue, which adjusts for accounting variability in revenue recognition, jumped 29.2% to $908 million, and non-GAAP earnings per share was up 43.8% to $0.23. The acquisition of King Digital definitely helped drive growth, but the company has also done a good job engaging more players and driving engagement through e-sports.
Management also raised non-GAAP revenue guidance to $6.275 billion for the full year and sees earnings of $1.78 per share.
Now what: Shares of Activision Blizzard are no longer cheap at 22 times earnings estimates, but the company has done a great job transitioning its business to a more stable revenue model. Subscriptions, mobile games, and the continuous release of expansion packs keep revenue flowing in all year and make the company less reliant on big game releases every year. And thanks to e-sports, the company has great engagement and an improving model for turning that engagement into revenue. In the long term, the company is well positioned in the game market.
Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends 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.
More from The Motley Fool
Why Activision Blizzard Stock Gained 75.4% in 2017
Impressive performance for key titles, industry tailwinds, and little in the way of meaningful setbacks made 2017 another great year for Activision Blizzard.
Activision Blizzard Is Going Big Into Consumer Products
And the sky is the limit.
The 5 Best-Selling Video Games of 2017
These five titles dominated U.S. gaming this year.