Last week was a good one for a pair of gaming software publishers at opposite ends of the diversion spectrum. Activision Blizzard (NASDAQ: ATVI) -- the country's largest video game company with a handful of huge console and PC franchises -- soared 15% on the week. Mobile gaming specialist Glu Mobile (GLUU) fared even better with its 26% pop. Both stocks moved higher after encouraging quarterly results.
Activision Blizzard's results may not seem all that impressive on their own. Adjusted net income fell sharply, though it was essentially flat on a per-share basis, at $0.79 a share given the fewer shares that are now outstanding. Adjusted revenue fell 13%, to $2.3 billion. However, analysts were settling for a profit of $0.73 a share on $2.2 billion in revenue.
Glu Mobile fared better on an absolute and relative basis. The mobile-gaming specialist posted a strong quarterly report, with adjusted revenue soaring 62%. Glu Moblie's adjusted profit of $0.07 a share blew past analysts, who were banking on the fast-growing company to merely break even.
Both companies also impressed the market by offering up encouraging outlooks for 2014, leaving Wall Street pros with no choice but to juice up their 2014 targets.
It's the future that matters, after all. Investors have set aside Activision Blizzard's growth challenges. A lull in console gaming ahead of November's Xbox One and PS4 rollouts has held the console industry back in recent years. It also doesn't help that World of Warcraft -- the company's flagship PC game -- has meandered after peaking in usage a couple of years ago. However, the comparisons should get better from here. Analysts see revenue and earnings climbing 8% and 37%, respectively, this new year. This kind of optimism has burned the pros in the past, but Activision Blizzard is back to its winning ways. It actually beat Wall Street's profit estimates in each of last year's four quarters.
Glu Mobile should grow even faster, with analysts seeing a sevenfold improvement in profitability on an 18% top-line surge. It's been quite the makeover for Glu Mobile. A week ago, analysts were only banking on a profit of $0.05 a share for all of 2014, but after last week's blowout performance, those same pros are now perched on a profit call of $0.14 a share.
A lot can go wrong. The Xbox One and PS4 migration cycle can go slower than expected. Mobile gaming can slow, or a disruptive upstart can show up out of nowhere. There always seems to be a Flappy Bird waiting in the wings. However, both companies earned last week's gains, and their prospects for improving in 2014 are bright. They should be able to keep it up.