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How Are Activision ETFs Reacting to Q3 Earnings Results?

Let's take a look at some ETFs with exposure to Activision Blizzard post the release of decent Q3 earnings results.

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This story originally appeared on Zacks

The coronavirus outbreak continues to accelerate sales in the video gaming industry. Recently-released data from The NPD Group emphasizes that the video game industry, including packaged media, digital, consoles and accessories, witnessed robust sales in September, with people spending $4.36 billion in all, reflecting 3% growth year over year.

- Zacks

For nine months, the total consumer spending on gaming rose 12% year over year to $42.28 billion. It is impressive to observe that the video gaming industry is witnessing strong sales growth despite tough year-over-year comparisons, highlighting the strength in the space.

Riding the trend, Activision Blizzard, Inc. ATVI, which reported third-quarter 2021 earnings on Nov 2, delivered better-than-expected results. However, it has lost around 2.2% since the earnings release as the fourth-quarter guidance seemed a little disappointing considering the holiday season quarter.

Q3 Earnings at a Glance

The company reported third-quarter 2021 non-GAAP earnings of 89 cents per share, up 1.1% year over year. Consolidated revenues rose 5.9% year over year to $2.07 billion.  Adjusting for revenues from non-reportable segments, net effect from the recognition of deferred revenues and elimination of intersegment revenues, total revenues were up 3.8% to $1.79 billion. The Zacks Consensus Estimate for earnings and revenues is pegged at 71 cents per share and $1.88 billion, respectively.

Activision Blizzard’s Monthly Active Users (MAUs) during the quarter ended Sep 30, 2021, remained flat at 390 million from the prior-year period. The company’s net bookings rose 6.4% year over year to $1.88 billion. Net bookings from digital channels came in at $2.34 billion, up 24.5% year over year.

Pandemic Pushing Video Games Sales Higher

The video game industry continues to thrive amid the ongoing health crisis. It also seems like the boom in the video gaming space may remain in the post-pandemic era as the outbreak has changed the lifestyle and preferences of Americans to a large extent.

Game developers are continuing to innovate and attract users every day and also retain old ones. They are increasing engagement for existing players by providing new titles, levels, arenas or environments as the games require at regular intervals.

Activision (35.9% of revenues) revenues declined 17.1% year over year to $641 million. The division had 119 million MAUs as of Sep 30, 2021, compared with 111 as of Sep 30, 2020. Call of Duty Mobile net bookings jumped more than 40% year over year in the third quarter.

Blizzard (20.6% of revenues) revenues of $493 million rose 20% from the year-ago quarter driven by the successful launch of Diablo II: Resurrected. Blizzard had 26 million MAUs as of Sep 30, 2021, compared with 30 million as of Sep 30, 2020.

King’s (36.5% of revenues) revenues of $662 million climbed 21.6% year over year. MAUs were 245 million as of Sep 30, 2021, compared with 249 million as of Sep 30, 2020.

Guidance

For fourth-quarter 2021, Activision Blizzard projects non-GAAP revenues of $2.02 billion and earnings of 62 cents per share. Net bookings are expected to be $2.78 billion.

For 2021, Activision Blizzard estimates non-GAAP revenues of $8.66 billion and earnings of $3.70 per share. Net bookings are expected to be $8.65 billion.

ETFs to Watch Out For

Against this backdrop, investors can take a look at the following ETFs:

VanEck Video Gaming and eSports ETF ESPO

The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Video Gaming and eSports Index, which is intended to track the overall performance of companies involved in video game development, esports, and related hardware and software. It holds 26 stocks in its basket. Activision Blizzard holds the seventh spot in the fund, with a 5.47% weight. With AUM of $646.7 million, the fund charges 55 basis points (bps) in expense ratio. The fund has gained about 2.1% since Activision Blizzard’s earnings release (read: Bet on These Video Gaming ETFs to Gain From Surging Sales).

Global X Video Games & Esports ETF HERO

The fund seeks to invest in companies that develop or publish video games, facilitate the streaming and distribution of video gaming or esports content, own and operate within competitive esports leagues, or produce hardware used in video games and esports, including augmented and virtual reality. It holds 40 stocks in its basket. Activision Blizzard holds the seventh spot in the fund, with a 4.65% weight. With AUM of $488.1 million, the fund charges 50 bps in expense ratio. The fund has risen around 0.5% since Activision Blizzard’s earnings release (read: 2 ETF Areas With Further Run-Up Potential on Tech Earnings Cues).



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