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Activision Blizzard vs. Electronic Arts: The Battle of the Gaming Stock

Andrew Steele

Activision Blizzard (ATVI) and Electronic Arts Inc. (EA) are two of the most widely recognized video game companies in the world. Last week, both companies were popular news topics, in that Activision Blizzard replaced Pall Corporation (PLL) in the S&P 500 and EA’s popular Madden NFL series released their latest incarnation, Madden NFL 16, on August 25th.

In the spirit of Madden NFL 16, let’s place these two video game companies in a head-to-head competition to determine if Activision Blizzard or EA is the more worthwhile investment to add to your portfolio.

Zacks Rankings

Activision Blizzard and Electronic Arts have the same Zacks Rank figure, a Zacks Rank #2 (Buy). Both companies are in the Toys – Game – Hobby industry, an industry in the top 12% in the Zacks Industry Rank, and both share the top spot in their respective industry; Hasbro Inc. (HAS) and Jakks Pacific (JAKK) also share the top spot with ATVI and EA with Zacks Ranks #2 (Buy). 

In the Style Scores category, Activision Blizzard manages some separation from Electronic Arts. Activision Blizzard has a ‘C’ in Growth, a ‘C’ in Value, and a ‘B’ in Momentum, compared to Electron Arts’ ‘D’ grade in each of the Style Scores’ subsections.

The slightly higher Style Scores for Activision Blizzard propels them to victory in the battle of the Zacks Ranking. This is a marginal victory for Activision Blizzard over Electronic Arts because the two companies do share the same exact Zacks Rank, which is the primary figure for this category.

Earnings

Over the past 10 quarters, all but once did Activision Blizzard and Electronic Arts fail to outperform the Zacks Consensus Estimates. Regarding their one occasions when the two companies did not outperform the earnings estimates, Activision pushed, reporting an EPS of $0.06 for the period ending in June of 2013, while Electronic Arts missed its estimated figure by 19.61%, reporting an EPS of $0.41 for the period ending in March of 2013.

Earnings for 2015 have been strong for both companies. Activision outperformed the estimates by 120% and 333.33% in the periods ending in June and March respectively, and EA outperformed the estimates by 111.11% and 92.86% in the same periods.

The year-to-year change in the companies’ earnings from their most recently reported earnings reports confirms growth for Activision Blizzard and losses for Electronic Arts. In the period ending in June 2014, Activision Blizzard reported a $0.04 EPS and in the period ending in June 2015, the company reported a $0.11 EPS – a 175% change. EA reported a $0.10 EPS in the period ending in June 2014 and a $0.01 EPS in the period ending in June 2015 – a -90% change.

Activision Blizzard edges out Electronic Arts for the battle of the earnings. Both companies have converted 9 of the last 10 Zacks Consensus Estimates by outperforming the figure. Both companies have also outperformed the earnings estimates for the past 2 quarterly earnings periods by notable percentages. However, the year-to-year growth of Activision Blizzard is the key to victory over EA for this category.

Revenues

Activision Blizzard increased its year-over-year Non-GAAP revenues in its most recent quarter, compared to Electronic Arts, who decreased its year-over-year Non-GAAP revenues. In the latest earnings reports, Activision Blizzard’s revenue for the quarter was $759 million with a 15.35% year-over-year increase, compared to EA’s $693 million and 10.58% year-over-year decrease in revenue.

For the battle of the revenues, Activision Blizzard once again beats out Electronic Arts. Both companies operate in the same competitive market and Activision has demonstrated growth, while EA appears to be heading in the opposite direction. 

Final Thoughts

Activision Blizzard sweeps the 3 major sub-battles and defeats Electronic Arts in this gaming stock head-to-head battle. This was a very close battle considering both these companies hold a Zacks Rank #2 (Buy).

The Forward PE figures for the companies also favor Activision Blizzard, in that the ATVI has a PE value of 23.66, compared to EA’s PE value of 26.42.

The competition was close and fierce. Activision Blizzard had the 3 keys to victory for this battle – better rankings, better earnings, and better growth. These factors were reasons why I recommended investors to potentially add Activision to their portfolios back in June. Electronic Arts came into this battle with a fighter’s chance. The company showed effort, grit, and left everything on the battlefield. However, in this industry, results matter, and Activision has the results of a champion.

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JAKKS PACIFIC (JAKK): Free Stock Analysis Report
 
HASBRO INC (HAS): Free Stock Analysis Report
 
ACTIVISION BLZD (ATVI): Free Stock Analysis Report
 
ELECTR ARTS INC (EA): Free Stock Analysis Report
 
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