Please ensure Javascript is enabled for purposes of website accessibility

Nasdaq Bounces as Activision Levels Up, Caesars Sees Casino Boom Ahead

By Dan Caplinger - May 5, 2021 at 2:49PM

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

Here's what two strong businesses had to say about their futures.

Stocks were generally mixed on Wednesday morning, but the Nasdaq Composite (^IXIC 2.09%) was able to provide at least a modest bounce after a big drop on Tuesday. As of 11 a.m. EDT, the Nasdaq was up about half a percent, as investors got a little more comfortable with the idea that growth stocks might not suffer huge declines after their big gains over the past year.

Earnings continue to provide some upward momentum for some Nasdaq stocks, and today's beneficiary was video game giant Activision Blizzard (ATVI 0.35%). In addition, economic reopening themes are helping some industries, and Caesars Entertainment (CZR 4.13%) saw an upward surge on hopes that the casino resort business will be back in full force before 2021 is done.

Activision scores a win

Shares of Activision Blizzard were up more than 4% on Wednesday morning. Investors reacted positively to news of the video game company's most recent quarterly results.

The numbers Activision Blizzard reported were much better than expected by most, including the company itself. Revenue climbed 27% to $2.28 billion, easily eclipsing the $2.02 billion in sales that Activision Blizzard had projected in February. Similarly, adjusted earnings of $0.98 per share were higher by 29% year over year and were far better than the $0.84 per share forecast from the video game maker.

Person holding video-game controller

Image source: Getty Images.

Within the company, numbers were mixed. The Activision segment did extremely well, with sales climbing 72% driven by a 40% rise in monthly active users playing various games in the Call of Duty franchise. The Blizzard division had to make do with a more modest 7% rise in segment revenue, and the King mobile game segment hit an all-time high for revenue as Candy Crush performed well.

Activision has high hopes that the remainder of the year will go well, projecting adjusted earnings of $3.42 per share. Even as people return to work and have less time stuck at home playing video games, Activision believes that its competitive advantages will give it an edge in a fast-growing market.

Caesars looks for a jackpot

Meanwhile, Caesars Entertainment gained more than 5% Wednesday morning, pushing its share price above the $100 mark. The casino company's first-quarter results still showed some signs of pandemic-provoked challenges, but Caesars has high hopes for the future.

Caesars' numbers for the first quarter were mixed. Revenue of $1.7 billion was up sharply from year-ago levels, but a large portion of the gain was attributable to corporate restructuring that occurred over the course of the past year. Accounting for those impacts, same-property revenue was down 16% year over year. Caesars also saw net losses balloon to $423 million, more than double the year-ago quarter's red ink. However, adjusted pre-tax operating earnings improved 23% compared to the previous year's period.

CEO Tom Reeg made positive statements during the conference call following the earnings release. Reeg expects that casinos will be popular destinations as the economy reopens, and Caesars properties in particular will do well because many of them are located in regional gambling centers that don't require as much travel by air. Moreover, Caesars' recent acquisition of sports betting specialist William Hill should give it an edge in the rapid growth of online gambling activity.

Betting on an economic recovery in 2021 might seem like a sure thing, but Caesars' stock is already up sevenfold in just over a year. As the company continues to reorganize itself as part of a longer-term restructuring, Caesars will need support from public visitors to keep its momentum.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends 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, Inc. Stock Quote
Activision Blizzard, Inc.
$80.79 (0.35%) $0.28
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$13,047.19 (2.09%) $267.27
Eldorado Resorts, Inc. Stock Quote
Eldorado Resorts, Inc.
$51.37 (4.13%) $2.04

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

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.