Activision Blizzard Hits 52-Week High: What's Driving It?

Shares of Activision Blizzard, Inc. (NASDAQ:ATVI) scaled a new 52-week high of $61.58 during yesterday’s trading session. The stock eventually closed a tad lower at $61.16, reflecting impressive one-year return of 65.4%, outpacing the S&P 500 market's growth of 19.5%.

Notably, Activision shares have also outperformed the Zacks categorized Toys - Games - Hobbies industry’s gain of 37.7% in the past year.

Key Factors

We are positive about Activision Blizzard’s enviable popularity in the video game publishing arena, which is primarily driven by its well-known franchises, that includes the likes of Call of Duty, Starcraft, and Warcraft. It currently has eight well-known franchises worth $1 billion.

It is worth mentioning the super success of its latest franchise, Overwatch, which has over 30 million players now following its release on May 24, 2016. Investors should note that the company is set to debut Destiny 2 and Call of Duty: WWII later this year over the holiday season. We believe these will be the two big revenue drivers for the company going ahead.

Moreover, the company’s attempts to become a broad-based media company are prudent in our view. Apart from launching a movie studio and consumer products division, the company is also strengthening presence in the lucrative e-sports market.

Furthermore, the company will continue to benefit from its acquisition of Ireland-based King Digital Entertainment last year. King Digital’s iconic title Candy Crush is one of the most well-known mobile games. To cash in on the booming mobile games market, acquisition of this already established player made sense. The buyout has boosted Activision Blizzard’s presence in the lucrative mobile gaming arena. Per the latest report from Newzoo, video games will generate $108.9 billion in revenues in 2017, up 7.8% year over year. Mobile games revenues will grow 19% to $46.1 billion representing 42% of the total revenue. By 2020, more than 50% of the revenues will come from mobile games.

Additionally, Activision Blizzard reported better-than-expected first-quarter 2017 results on May 4. Adjusted earnings of 27 cents and revenues (including deferrals) of $1.196 billion handily beat the respective Zacks Consensus Estimate of 16 cents and $1.103 billion.

With respect to the earnings surprise, the stock has surpassed the Zacks Consensus Estimate in the trailing four quarters with an average surprise of 28.56%.

Currently, Activision Blizzard carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the broader tech space include TiVo Corp (NASDAQ:TIVO) , Hasbro, Inc. (NASDAQ:HAS) , and Nintendo Co. (OTC:NTDOY) . While TiVo sports a Zacks Rank #1 (Strong Buy), Hasbro and Nintendo carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the trailing four quarters, TiVo, Hasbro and Nintendo delivered average positive earnings surprises of 67.56%, 16.54% and 23.95% respectively.

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