Should You Buy Activision Blizzard (ATVI) Stock Ahead Of Earnings?

Shares of Activision Blizzard (NASDAQ:ATVI) gained nearly 1.2% in morning trading Thursday as the company prepares to release its third-quarter 2016 earnings results after the market closes. With gaming industry competitors like Nintendo (OTC:NTDOY) and Electronic Arts (NASDAQ:EA) already reporting mixed results, all eyes will be on ATVI this afternoon.

Our current Zacks Consensus Estimates call for earnings of $0.39 per share and revenues of $1.575 billion. It’s worth noting, however, that Activision has guided for revenue of $1.490 billion, which reflects the new SEC reporting guidelines many video game companies have had to follow. The company will no longer include the impact from revenue deferrals accounting treatment on certain online enabled products.

Overall, increasing digital revenues and continued strength of the Call of Duty franchise, as well as new games like World of Warcraft: Legion and Destiny: Rise of Iron should help pad Activision Blizzard’s quarterly results.

Additionally, reports from May indicated that the company’s smash hit Overwatch has over 20 million users. The game will become part of ATVI’s recent efforts to become a broad-based media company; in addition to the launch of its new movie studio, Activision is looking to create an e-sports league for Overwatch.

E-sports, or professional competitive gaming, are booming, and Activision’s new league could become a major revenue stream for the company. The advent of competitive gaming has brought a renewed interest to PCs, and several “competition-focused” games have accrued millions of loyal fans. For more on the latest trends in the video gaming industry, check out this exclusive interview with Andrew Chanin, CEO of Pure Funds, and the Zacks Friday Finish Line team:

Looking towards this afternoon, Activision’s Earnings ESP is -5.13%. This is because the Most Accurate estimate stands at 37 cents whereas the Zacks Consensus Estimate stands at 39 cents. Nevertheless, Activision has proven its ability to surpass earnings expectations, with an average beat of 33.54% in the trailing four quarters.

While an earnings beat is difficult to definitively call right now, Activision’s earnings report will certainly be a telling sign for the video game industry.

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