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Why Activision Blizzard (ATVI) Stock Is Up Today

NEW YORK (TheStreet) -- Activision Blizzard (ATVI - Get Report) rose Wednesday after the video game company reported first-quarter results that surpassed analysts' expectations.

Activision Blizzard reported a 4% year-over-year decline in adjusted revenue to $772 million from $804 million. The company also reported record digital sales, which made up 68% of total revenue. Adjusted income rose to 19 cents a share from 17 cents a share in the same period one year earlier.

Analysts had expected earnings of 10 cents a share on revenue of $688.3 million, according to Thomson Reuters I/B/E/S.

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Activision Blizzard slightly increased its full-year adjusted earnings per share guidance for 2014 to $1.27 from its previous guidance of $1.26. This was just short of analysts' estimate of $1.29, according to Thomson Reuters I/B/E/S.

The stock was up 4.4% to $20.16 at 10:38 a.m.

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Separately, TheStreet Ratings team rates ACTIVISION BLIZZARD INC as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate ACTIVISION BLIZZARD INC (ATVI) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, ATVI's share price has jumped by 35.48%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ATVI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • ATVI's debt-to-equity ratio of 0.71 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that ATVI's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.06 is high and demonstrates strong liquidity.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Software industry and the overall market on the basis of return on equity, ACTIVISION BLIZZARD INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • ACTIVISION BLIZZARD INC's earnings per share declined by 29.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, ACTIVISION BLIZZARD INC reported lower earnings of $0.95 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $0.95).
  • You can view the full analysis from the report here: ATVI Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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