One Factor Pushing Activision Blizzard (ATVI) Stock Down Today

Activision Blizzard (ATVI) stock is declining after video game retailer GameStop (GME) reported lower than expected fiscal 2015 third quarter financial results.
By Amanda Gomez ,

NEW YORK (TheStreet) -- Activision Blizzard (ATVI) - Get Report stock is decreasing 0.51% to $37.32 in afternoon trading on Monday after video game retailer GameStop Corp. (GME) reported disappointing fiscal 2015 third quarter financial results before the market open this morning.

GameStop reported earnings of 54 cents per share on $2.02 billion in revenue for the quarter ended October 31, missing estimates of earnings of 59 cents per share on $2.15 billion in revenue.

The company's results can be attributed to a growth in digital games, which developers like Activision Blizzard see as a revenue booster.

Earlier this month, Activision Blizzard reported revenue of $1.04 billion for the 2015 third quarter, beating estimates of $951.72 million, with digital games contributing $697 million.

Activision Blizzard will further expand it digital portfolio with the $5.9 billion acquisition of King Digital Entertainment (KING), the developer behind online games such as Candy Crush and Farm Heroes. The transaction is expected to close by next spring.

GameStop's fiscal 2015 fourth quarter may see improvements because of new game releases, including Activision Blizzard's Call of Duty: Black Ops III that was released on November 6.

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

We rate ACTIVISION BLIZZARD INC (ATVI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and notable return on equity. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

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

  • The revenue growth greatly exceeded the industry average of 15.7%. Since the same quarter one year prior, revenues rose by 31.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 666.66% and other important driving factors, this stock has surged by 89.11% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
  • ACTIVISION BLIZZARD INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ACTIVISION BLIZZARD INC increased its bottom line by earning $1.14 versus $0.95 in the prior year. This year, the market expects an improvement in earnings ($1.36 versus $1.14).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 652.2% when compared to the same quarter one year prior, rising from -$23.00 million to $127.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, ACTIVISION BLIZZARD INC's return on equity exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: ATVI

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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