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Activision Blizzard Whiffs On Q4 EPS, Sales; Stock Sinks

Video game publisher Activision Blizzard ( ATVI ) late Thursday missed Wall Street’s targets for the fourth quarter and gave conservative guidance for the current quarter and full-year 2016. Investors punished Activision stock on Friday. In morning trading, Activision shares were down about 10% to about 27 on the stock market today . On Dec. 29, Activision stock hit an all-time high of 39.93. At least eight Wall Street analysts cut their price targets on Activision stock after the earnings report. The Santa Monica, Calif.-based company earned 83 cents a share excluding items on sales of $2.12 billion. Analysts polled by Thomson Reuters expected Activision to earn 86 cents a share on sales of $2.20 billion. On a year-over-year basis, Activision’s EPS fell 12%, and its sales slipped 4%. Activision was hurt by smaller-than-expected sales of “Guitar Hero Live” and “Skylanders” during the holiday quarter, as well as negative foreign-exchange trends, Benchmark analyst Mike Hickey said in a research report Friday. For the current quarter, Activision expects to earn 11 cents a share ex items on sales of $800 million. For 2016, Activision is looking to earn $1.75 in adjusted EPS on sales of $6.25 billion. Activision’s figures include its planned acquisition of King Digital Entertainment ( KING ), while current Wall Street estimates do not. Excluding King, Activision’s core adjust EPS guidance for the year would be $1.35, 21 cents below Wall Street consensus, Hickey said. “The company’s weaker-than-anticipated guidance was primarily attributable to the delay of (the sequal to action game) ‘Destiny’ and the general conservative nature of management,” Hickey said. He rates Activision stock buy, but he lowered his price target to 37.63 from 43.07. ‘Call Of Duty’ Helped Activision The underperformance of “Guitar Hero” and “Skylanders” was partially offset by the continued success of “Call of Duty: Black Ops 3,” Piper Jaffray analyst Michael Olson said in a report Friday. He reiterated his overweight rating on Activision stock but cut his price target to 39 from 42. “We still believe a history of conservatism suggests the outlook may prove low,” Olson said. “Activision has exceeded its original full-year revenue and EPS outlook, on average, by 19% and 7% from ’09 to ’15.” Excluding a tax benefit, Activision would have missed its earnings guidance for the first time in 10 years in the fourth quarter, Wedbush analyst Michael Pachter said in a report Friday. He maintained his outperform rating on Activision stock but lowered his 12-month price target to 40 from 47. Pacific Crest Securities analyst Evan Wilson said the holiday season proved “strangely difficult” for the video game industry. Activision, Electronic Arts ( EA ), GameStop ( GME ) and Ubisoft all disappointed with their recent earnings reports, he said. “This is supposed to be the sweet spot right?” Wilson said in a report Thursday. “What has become clear is that the breadth of successful games continues to narrow, and increases in competition can have a huge impact, especially on lower-quality or casual titles. This holiday likely fully transitions the sector from ‘buy the basket’ to ‘buy the slate,’ as releases don’t guarantee success.” Wilson maintained his overweight rating on Activision stock but trimmed his price target to 36 from 41. RELATED: Take-Two Interactive Software’s Games Show Staying Power; Q3 Beats Electronic Arts Falls On Mixed Q3, Weak Guidance .

Zynga Stock Getting Dogged By Declining User Base

Once-hot Zynga ( ZNGA ), a maker of mobile and social video games, saw its stock crater to a new low Thursday after reporting that its user base continued to shrink last quarter. Zynga went public in December 2011 at 10 and reached as high as 15.91 in March 2012. It initially rode on the coattails of Facebook ( FB ), providing games like “FarmVille” for the booming social network. But its fortunes turned south after Facebook ended a partnership with Zynga. Zynga stock was down 15% to 1.80 in late-afternoon trading on the stock market today . Earlier in the session, shares hit an all-time low of 1.78. Zynga, named after the founder’s dog, is certainly acting like one. Late Wednesday, Zynga said it broke even in the December quarter on sales of $182.1 million. Earnings were in line, and sales were better than the $178 million expected by analysts polled by Thomson Reuters. Zynga’s sales were down a smidge from $182.35 million in the year-earlier quarter. But Zynga reported a drop in monthly active users for the sixth consecutive quarter. “Users continue to flee,” Pacific Crest Securities analyst Evan Wilson said in a research report Wednesday. Zynga had 18 million daily active users and 68 monthly active users in Q4. Both numbers missed consensus views. Analysts were expecting 18.7 million daily active users and 74.8 million monthly active users. “A successful turnaround effort needs to include stabilizing the user base, in our view, and we are still not confident Zynga has the (game) slate to do this,” Wilson said. He rates the stock as sector weight. Zynga has an ambitious slate of 10 games to be launched this year. They include new social casino and matching games, as well as racing game “CSR2” and action strategy game “Dawn of Titans.” However, Zynga has “consistently overpromised and underdelivered,” Wilson said. Fox Business Network on Thursday put Zynga on its “ death watch .” Baird analyst Colin Sebastian on Thursday reiterated his neutral rating and price target of 3 for Zynga stock. Sebastian noted that the company is likely to face heightened competition ahead from well-capitalized video game publishers like Activision Blizzard ( ATVI ) and Electronic Arts ( EA ). “EA has acquired a number of social game companies and is in the process of porting a number of its legacy franchises from consoles onto emerging platforms,” Sebastian said. “We also believe that Activision is rethinking its online and social strategy, and will come to market with new online games, and may also pursue acquisitions of game developers.” Activision is in the process of purchasing mobile game publisher King Digital Entertainment ( KING ). RELATED: Taylor Swift Video Game In Glu Mobile Investors’ ‘Wildest Dreams’ .

Taylor Swift Video Game In Glu Mobile Investors’ ‘Wildest Dreams’

The rumored bad blood between pop stars Taylor Swift and Katy Perry soon will spill over into the mobile video game arena. Mobile game publisher Glu Mobile ( GLUU ) announced late Wednesday that it has partnered with Swift to develop a smartphone game set for release in late December. The pop star, known for such hit songs as “Wildest Dreams” and “Blank Space,” will join Glu’s growing celebrity roster, which includes Perry, Kim Kardashian and others. Swift reportedly wrote her song “ Bad Blood ” about her fallout with Perry. Shares of low-priced small-cap stock Glu were up 31%, near 2.60, in early afternoon trading on the stock market today . Glu announced its deal with Tay-Tay at the same time it posted Q4 earnings that beat analyst expectations . San Francisco-based Glu earned 2 cents a share excluding items on sales of $57.9 million in the December quarter. Analysts polled by Thomson Reuters expected Glu to lose 3 cents a share on sales of $50.5 million. On a year-over-year basis, earnings per share tumbled 82% and sales fell 24%. Glu Mobile CEO Niccolo de Masi attributed the Q4 outperformance to continued strong results from its top games – “Kim Kardashian: Hollywood,” “Cooking Dash 2016,” “Racing Rivals” and “Deer Hunter 2016.” Meanwhile, “Katy Perry Pop,” launched Dec. 17, was widely seen as a flop, blamed on poor game design. Other upcoming celebrity video games from Glu will feature pop singers Britney Spears and Nicki Minaj, reality TV stars Kendall and Kylie Jenner, and chef Gordon Ramsay. By signing Swift, Glu has effectively locked up the market for games featuring high-profile female celebrities, Cowen analyst Doug Creutz said in a research report Thursday. “At the very least, we believe Glu has eliminated any possibility of real competition in the genre for the next several years,” Creutz said. Last month, Glu agreed to take a minority stake in Plain Vanilla Corp. , based in Reykjavik, Iceland. Plain Vanilla is the developer behind the globally popular game “QuizUp.” Glu also has an option to acquire the company at a pre-agreed price. The competitive landscape in mobile gaming is beginning to shake out, de Masi said on a conference call with analysts. “New company formation has slowed dramatically as venture capital has dried up,” he said. “Over the next 24 months, I anticipate significant consolidation and the emergence of fewer, bigger, stronger global firms.” In November, Activision Blizzard ( ATVI ) agreed to buy “Candy Crush” mobile game maker King Digital Entertainment ( KING ) for $5.9 billion. Other major players in the mobile game market include Supercell, Machine Zone, Rovio, Electronic Arts ( EA ) and Zynga ( ZNGA ). Image provided by Shutterstock .