URGENT ALERT: Please beware of fraudulent WhatsApp groups and other groups across Social Media pretending to be affiliated with Anchor and Anchor staff members. Do not engage with these malicious and fraudulent groups in any way. Please direct all queries to invest@anchorcapital.co.za.

Weak guidance weighs on Activision Blizzard following 4Q18 results

Activision Blizzard, the maker of popular games such as Call of Duty and Warcraft, announced FY18 and 4Q18 results on Tuesday (12 February). The company had a record-setting FY18, bringing in $7.5bn in revenue, up 6% YoY, and $1.81b in net income, also significantly higher than the $273mn it recorded in FY17. For 4Q18, EPS came in at $1.29, which was slightly above a Refinitiv consensus analyst estimate of $1.28 and compared to a loss of USc77/share reported in 4Q17. Revenue of $2.38bn (+16.7% YoY vs 4Q17’s $2.04bn) missed the Refinitiv consensus expectation of a $3.04bn print.

In terms of operating segments:

Activision had 53mn monthly active users (MAUs) in the quarter, growing by double-digits QoQ. Fourth quarter segment revenues rose 6% YoY to $1.41bn and operating income increased by 14% YoY to $723mn. Call of Duty was again the number-one selling console franchise worldwide fin 2018, a franchise feat it has accomplished for nine of the past 10 years. Activision also successfully launched the Spyro Reignited Trilogy in 4Q18, while Crash Bandicoot N. Sane Trilogy continued to contribute having sold-in over 10mn units since its 2017 release.

Blizzard reported 35mn MAUs in the quarter, as Overwatch and Hearthstone saw sequential stability and World of Warcraft recorder (expected) declines post-expansion-launch. Fourth-quarter segment revenues grew 15% YoY to $686mn and operating income increased by 51% YoY to $241mn. Building on an 11-year partnership, Blizzard extended its joint venture with NetEase to publish its games in China through January 2023.

King had 268mn MAU in the quarter, driven by a successful launch and strong monetisation of Candy Crush Friends Saga. Fourth-quarter segment revenues grew 5% YoY to $543mn and operating income increased by 28% YoY to $207mn. In the quarter, King had two of the top-10 highest-grossing titles in the US mobile app stores for twenty-one quarters in a row, with Candy Crush Saga at number-one again. Advertising in the King network was again profitable with net bookings growing by 50%-plus sequentially.

Nevertheless, several headwinds seem to be emerging for Activision: overall the gaming industry has been feeling increasing pressure from free-to-play competitor Fortnite, while the company itself has seen some high-profile executive shakeups over recent months including its former CFO moving to Netflix. In January, the firm also split from game studio, Bungie thus relinquishing its rights to the Destiny game franchise.

During the earnings call, management said outright that no major new releases are coming from Blizzard, while Activision currently only has two upcoming releases. The company did say that it will be focusing more on its biggest franchises such as Call of Duty, Candy Crush, Warcraft, Hearthstone, and Diablo, with plans to increase developers across those titles by “approximately 20% over the course of 2019.”

Looking ahead, the Group gave relatively bleak guidance and said that it will cut 8% of its global workforce. Activision Blizzard said it expects 1Q19 EPS of USc20 (less than 50% of what consensus forecasts were expecting), on revenue of $1.18bn. Refinitiv consensus estimates projected EPS of USc46 on revenue of $1.45bn for 1Q19. For the full-year the firm said it expects earnings of $2.10/share on $6.03bn in revenue – also well below the Refinitiv consensus forecast of earnings of $2.54/share on $7.25bn in revenue.

Activision’s share price is down c. 50% since it reached a 52-week high of $84.68/share in October 2018. It was trading at c. $43/share following the results.



Submit your details and we’ll give you a call back to assist and advise you on your investment.


Subscribe to our newsletters to receive regular market commentary, research and updates from the Anchor team. Select between our Individual or Financial Advisor newsletters by selecting the relevant tab below.

WEBINAR | The Navigator – Anchor’s Strategy and Asset Allocation, 2Q24

Anchor CEO and Co-CIO Peter Armitage will host the webinar, provide an introduction to current global and local market conditions and give his thoughts on offshore equities. Together with Head of Fixed Income and Co-CIO Nolan Wapenaar, Pete will also discuss Anchor’s strategy and asset allocation for 2Q24, focusing on global equities and bonds. In addition, Fund Manager Liam Hechter will provide insights into local equities, highlighting some investment ideas; Global Equities Analyst James Bennet will discuss Ferrari and give an update on Tesla, and finally, Analyst Thomas Hendricks will participate in a Q&A with Peter, explaining the 10-year US Treasury to attendees.