Will Activision Blizzard (ATVI) Stock be Helped by Strong May Digital Sales?

NEW YORK (TheStreet) -- Activision Blizzard (ATVI) shares are flat at $25.30 in pre-market trading on Friday following a report by industry research group SuperData Research that showed that May U.S. digital sales rose 11% year over year led by Activision's 'Call of Duty: Advanced Warfare' video game.

Digital game sales reached $979 million in May, a month in which SuperData says sales usually plateau ahead of the summer season and the busy holiday season.

However, despite a lack of increase in the number of gamers, both digital console and digital PC downloads saw increases in revenue of 17% and 12%, respectively, with digital console revenues reaching $67 million while PC digital revenue was $203 million.

The data was released ahead of the annual Electronic Entertainment Expo (E3) next week in Los Angeles where video game makers showcase some the industry's most anticipated video games and consoles.

Revenue from traditional non-digital video games is expected to be above $16 billion this year with total video game sales topping out at about $20 billion, according to USA Today.

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, increase in net income and attractive valuation levels. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

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

  • The revenue growth came in higher than the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 15.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • ACTIVISION BLIZZARD INC has improved earnings per share by 32.5% 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 ($1.24 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 34.5% when compared to the same quarter one year prior, rising from $293.00 million to $394.00 million.
  • You can view the full analysis from the report here: ATVI Ratings Report

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