Please ensure Javascript is enabled for purposes of website accessibility

Here's What to Watch When Activision Blizzard Reports Earnings on Tuesday

By Parkev Tatevosian, CFA – Aug 3, 2020 at 3:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Anything less than a home run will disappoint the market.

The coronavirus pandemic is causing millions of people around the world to stay home more often than they would like. The increased time spent indoors is leading to a surge in demand for in-home entertainment. That creates an opportunity for video game company Activision Blizzard (ATVI 1.70%) to help millions of consumers with some much-needed distraction from COVID-19. 

Still, challenges remain for the company as the expiration of boosted unemployment benefits will leave consumers with less money to spend on games, and the return of live sports could divert attention away from its products. The company is expected to release its fiscal second-quarter financial results on Tuesday, Aug. 4. Here are a few critical things investors should follow in the report. 

A man playing games on the computer.

Activision Blizzard is helping entertain people during the pandemic. Image source: Getty images. 

Millions of people staying home with Activision Blizzard products one click away

The company is expected to report $1.69 billion in revenue for the quarter, but the company handily topped its revenue guidance of $1.64 billion in the first quarter with an actual top line of $1.79 billion. Given the tailwinds for the video game industry in this latest period, the company could outperform its original outlook once again.

Investors should also track the monthly active users (MAU) metric. In the first quarter, the company had 407 million MAUs, up 18% year over year. Driving this gain was the release of blockbuster title Call of Duty: Modern Warfare in late 2019 and the free-to-play Call of Duty: Warzone in March 2020. The latter reached 60 million MAUs less than two months following its launch. The company ideally leveraged that early momentum for solid MAU growth through the second quarter.

On the bottom line, Activision Blizzard previously guided for non-GAAP earnings per share of $0.64. These days, gamers have the option to purchase most titles digitally, which removes the expense of physical delivery for the company. This was evident in the previous quarter when digital sales made up nearly 90% of the company's bookings. That digital penetration protects Activision Blizzard from brick-and-mortar store closures as well.

A sign that says lets play.

Activision Blizzard is set to release its second-quarter earnings on Tuesday. Image source: Getty images.

Activision Blizzard is ready to meet the opportunity 

One of the major themes during the pandemic has been the surge in demand for in-home entertainment. Unfortunately, when that need was most elevated, major sports leagues were canceled, and film and television studios paused new content creation. That left a void that shareholders of Activision Blizzard are hoping the company helped fill.

Additionally, the digital nature of its business means the company can continue creating fresh new games, which becomes an advantage over other entertainment mediums. Overall, the outlook for this leading video game stock's upcoming report is quite bullish.

Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Activision Blizzard and recommends the following options: long January 2022 $75 calls on Activision Blizzard and short January 2022 $75 puts on Activision Blizzard. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Activision Blizzard Stock Quote
Activision Blizzard
ATVI
$74.72 (1.70%) $1.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.