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Why Activision Blizzard, Inc. Shares Plunged 13% Today

By Travis Hoium - Feb 12, 2016 at 2:29PM

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Activision Blizzard, Inc. is down today because fourth-quarter earnings fell short of investor expectations.

What: Shares of video game maker Activision Blizzard (ATVI -1.09%) dropped as much as 13% in trading today after reporting worse-than-expected earnings.

So what: On a non-GAAP basis, revenue fell 4% in the fourth quarter to $2.12 billion, which was below the $2.2 billion analysts had forecasted. On the bottom line, earnings of $0.83 per share were down from $0.94 a year ago and behind the $0.87 in earnings analysts predicted.  

Activision Blizzard had a huge hit in the quarter with Call of Duty: Black Ops 3, but had very little success outside of that franchise. Skylanders and Guitar Hero Live underperformed management's own expectations and didn't inspire much excitement from consumers, either.

Now what: The video game business can be very volatile and financial performance can rely on how the big hits do. Activision Blizzard had that with one title last quarter but didn't accomplish it across the board.

While the disappointment is understandable giving declining results, I don't think there's anything fundamentally wrong with the company's business. It's still one of the most profitable and prolific game makers in the world and it's making a transition to digital platforms effectively. There will be growing pains, but I would look at this dip in shares as more of an opportunity for long-term investors than a sign of weakness in the business model.

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