The Hidden Truth Behind Activision Blizzard, Inc. (ATVI)’s Outlook

Page 1 of 2

The joy of Activision Blizzard, Inc. (NASDAQ:ATVI) investors when they see a massive spike in the share price can be compared to parents’ happiness when their baby takes his first steps, since both of them are rare events. Despite delivering terrific results in the past one year, the stock had barely budged. But all that changed this time.

Activision posted yet another solid quarter and its shares took off towards the galaxy, rising as much as 11% after results. More surprisingly, Activision shares have gained around 26% in the past three months, something which I had expected but wasn’t entirely sure if such a thing can happen.

Activision Blizzard, Inc. (NASDAQ:ATVI)Also, investors celebrated the company’s terrific fourth-quarter with all pomp, ignoring a shallow outlook for the current quarter and the entire year. Its revenue and earnings expectation of $4.175 billion and $0.80 per share for the full year are quite behind consensus estimates of $4.56 billion and $0.97, apart from being behind the company’s own fiscal 2012 performance.

Ignorance is not always bliss

Since Activision is known for lowballing guidance, investors didn’t pay much attention to it. But were they right in doing so this time? They expect the stock to start running now, but it might fall right down like that baby who just took his first steps. Management seems concerned about how Activision might perform this year due to certain challenges, which indicates that the company might not be guiding low intentionally for the current year. Or will it turn out to be a faux pas? Let’s check.

After a strong 2012, Activision calls 2013 as a year of transition. The present generation of gaming consoles, the Microsoft Corporation (NASDAQ:MSFT) Xbox 360 and Sony Corporation (NYSE:SNE)’s PlayStation 3 in particular, are almost eight years old now. Activision is skeptical about how the next console transition might affect its performance.

Microsoft is expected to put the next iteration of its hugely popular game console on sale later this year in November, after Sony fires its own salvo in October. The Xbox 360 had taken the world by storm when it released years back, and it won’t be surprising if the next version is sold out once again like its predecessor on launch. Similarly, Sony has also found considerable success with the PS3 but might take the PS4 to another level by focusing on home entertainment in a big way, so as to give consumers an added incentive.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!