Investors in Activision Blizzard, Inc. (NASDAQ:ATVI) had a good week, as its shares rose 5.2% to close at US$61.53 following the release of its annual results. It looks like a credible result overall - although revenues of US$6.5b were what analysts expected, Activision Blizzard surprised by delivering a (statutory) profit of US$1.95 per share, an impressive 25% above what analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
After the latest results, the 23 analysts covering Activision Blizzard are now predicting revenues of US$6.77b in 2020. If met, this would reflect a credible 4.4% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to dip 9.3% to US$1.78 in the same period. Before this earnings report, analysts had been forecasting revenues of US$6.92b and earnings per share (EPS) of US$1.82 in 2020. Analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
Analysts made no major changes to their price target of US$65.42, suggesting the downgrades are not expected to have a long-term impact on Activision Blizzard's valuation. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Activision Blizzard at US$76.00 per share, while the most bearish prices it at US$43.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Activision Blizzard's performance in recent years. It's pretty clear that analysts expect Activision Blizzard's revenue growth will slow down substantially, with revenues next year expected to grow 4.4%, compared to a historical growth rate of 10.0% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 10% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Activision Blizzard to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Activision Blizzard going out to 2024, and you can see them free on our platform here..
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