What To Expect From Activision Blizzard In 2019?

by Trefis Team
Activision Blizzard
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Activision Blizzard (NASDAQ:ATVI) recently posted its Q4 results, which were in line with our estimates. The top line grew in mid-teens while its bottom line saw strong double-digit growth, primarily led by a higher contribution from Blizzard. However, the segment saw continued softness in net bookings. In fact, the company has guided for a significant decline in the Blizzard segment in 2019. We forecast a low double-digit decline in the company’s top line, and a low thirties percent decline in the adjusted earnings, primarily due to the expected trends in the Blizzard segment, which we discuss below. We have created an interactive dashboard ~ A Quick Snapshot of Activision Blizzard’s Q4 Performance And Trefis Estimates For The Full Year 2019. You can adjust various drivers to see the impact on the company’s earnings, and price estimate.  In addition, here is more Information Technology data.

Expect Revenues To Decline In Low Single-Digits

Activision revenues were up in mid-single-digits in 2018, primarily led by Call of Duty: Black Ops 4, The game has seen strong sales in the recent months. In fact, it was No. 2 in NPD’s top 10 grossers list for 2018. The game will likely see continued demand in Q1 as well, and the company plans to release the next line up in the franchise in Q4 2019. However, the company’s management in its recent earnings conference call stated that the segment revenues won’t see any significant growth (y-o-y) in 2019, given that Destiny’s publishing rights were sold to Bungie.

The Blizzard segment saw high single-digit revenue growth in 2018, led by World of Warcraft: Battle of Azeroth. However, the company saw softness in net bookings (in-game). There is no release planned for World of Warcraft in 2019, and this will have a significant impact on the company’s performance. We forecast the decline to be as steep as 50% on the segment’s revenues. Looking at King Digital, the segment revenue grew 7%, led by its new game ~ Candy Crush Friends. However, its monthly active user base of around 271 million was down in low double-digits (y-o-y). We forecast the segment revenues to grow in low double-digits in 2019, led by an expected pick up in its active user base, with the launches in the Candy Crush franchise, and an uptick in advertising revenues.

Overall, we forecast the company’s revenues to decline in low double digits to $6.67 billion in 2019, primarily due to the plunge in the Blizzard segment. Note that our forecast is above the company’s guidance of $6.30 billion. We expect the earnings to be $1.90 per share for the full year 2019, on an adjusted basis. Our price estimate of $52 for Activision Blizzard is based of a 28x forward price to earnings multiple.

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