Activision is due to report earnings this week
Activision Blizzard, Inc. (NASDAQ:ATVI) is one of the world’s largest interactive entertainment and gaming corporations. The company develops and distributes content/services for video game consoles, personal computers, and mobile devices across the world. Activision Blizzard primarily operates through three segments: Activision Publishing, Blizzard Entertainment, and King Digital Entertainment. The company’s portfolio of game franchises includes major titles like Call of Duty, Crash Bandicoot, Guitar Hero, Tony Hawk's, Spyro, World of Warcraft, Diablo, Overwatch, and Candy Crush Saga.
With Activision’s fourth-quarter results set to be released after the market closes on Thursday, Feb. 4, now is the perfect time for a closer look at the company’s recent earnings history. Over the past year, Activision outperformed earnings expectations on all four of its most recent quarters.
For the fourth quarter of 2019, Activision beat expectations by a margin of $0.04 and reported an earnings per share (EPS) of $1.23. For the first quarter of 2020, ATVI reported an EPS of $0.58 and beat Wall Street's earnings expectations by a significant margin of $0.20. Activision posted $0.97 in EPS for the second quarter of 2020, beating expectations by a big margin of $0.29. In its most recent quarterly earnings report, ATVI reported earnings of $0.71 per share, beating analyst expectations by $0.06. Moreover, the company is expected to boost its EPS to $1.17 in its report later this week.
Regarding the stock's price performance, ATVI has added nearly 60% over the past 12 months. So far in 2021, the stock has seen a bit of volatility, most recently hitting a fresh record high of $95.87 on Jan. 20. Even further, the stock currently up about 80% from its 52-week low of $50.51.
Options traders have been fiercely bullish. Activision Blizzard stock's 50-day call/put volume ratio of 5.78 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than all other readings from the past year. This shows a strong penchant for long calls in the last 10 weeks.
From a fundamental point of view, Activision is lacking in consistent growth of revenue and net income. Over the past two years ATVI dropped its annual revenue by more than $1 billion and its net profits by roughly $250 million. Nonetheless, Activision has plenty of positive point to back itself up with. Activision carries a huge $7.6 billion in cash in contrast to the company's just $3.6 billion in total debt.
Activision’s forward price-earnings ratio is estimated at 26.67. Although this figure may not look too attractive at first glance, it provides a reasonable entry point for a company with potential to dominate in a fast-growing market. The e-sports industry makes Activision a potential growth play for investors looking at the stock with a long-term perspective.