Activision (ATVI) Mirrors EA (EA) Losses

NEW YORK (TheStreet) -- Activision Blizzard (ATVI) dropped 4.2% to $16.58 in Tuesday trading, mirroring rival video game publisher Electronic Arts' (EA) 2.8% loss to $24.13. The latter shed share value in anticipation of its earnings after the bell, average reviews of the newly-released Battlefield 4 and news it had ended its 15-year partnership with Tiger Woods.

EA reported second-quarter earnings of 33 cents, beating expectations by 21 cents, on revenue of $1.04 billion. Analysts surveyed by Yahoo! Finance expected revenue of $976.1 million.

For the seasonally-strong third quarter, EA predicts earnings of $1.22 on revenue of $1.65 billion, below analyst estimates of $1.32 on $1.75 billion. The video game company revised its full-year guidance to $1.25 a share on $4 billion in revenue.

For its most recently reported quarter, Activision reported earnings of 8 cents a share on revenue 42% lower year on year to $608 million. Management expects full-year revenue of $4.25 billion, below consensus of $4.29 billion. The company is slated to report third-quarter results on Nov. 6.

In post-market trading, EA has regained 3.2%, while Activision is unchanged.

TheStreet Ratings team rates Activision Blizzard Inc as a Buy with a ratings score of A-. The team has this to say about its 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 solid stock price performance, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

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

  • Powered by its strong earnings growth of 75.00% and other important driving factors, this stock has surged by 56.22% 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.
  • 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 75.1% when compared to the same quarter one year prior, rising from $185.00 million to $324 million.
  • ATVI has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.91, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for Activision Blizzard Inc is currently very high, coming in at 79.35%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 30.82% is above that of the industry average.

TheStreet Ratings team rates Electronic Arts Inc as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate Electronic Arts Inc (EA) a BUY. This is driven by some important positives, 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 growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

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