Activision Blizzard May Be Played Out

 | Feb 28, 2017 | 9:00 AM EST
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With shares of Activision Blizzard Entertainment (ATVI) up 43% in the latest 12 months, the stock is the third-best-performing tech stock in the S&P 500. So, is this stock played out?

Activision Blizzard shares popped 20% after the company reported a blow-out fourth quarter on Feb. 9. Year to date, ATVI is up 26.5%.

Activision Blizzard reported fourth-quarter earnings of $0.92 per share and net revenue of $2.45 billion, according to FactSet data. The revenue figure was up 50% from the previous quarter and exceeded the consensus estimate of $2.38 billion.

For fiscal 2016, Activision Blizzard reported GAAP revenue of $6.6 billion.

Activision Blizzard generated a record $2.16 billion in operating cash flow for the year ended Dec. 31, 2016, an increase of 71% year over year. For the quarter, operating cash flows were $859 million.

A lot of people play the company's games. Activision Blizzard had 447 million monthly active users (MAUs) in the quarter. Its Blizzard unit had its highest annual MAUs in 2016 at 36 million, up 37% from 2015 and an 87% jump from 2014.

Overwatch became Blizzard's fastest-growing game ever to reach 25 million players globally. World of Warcraft MAUs grew 10% in 2016.

Activision has the biggest online player community in history with annual MAUs of 50 million, up 3%.

King Digital reported 405 million MAUs for the year, down 21%. King is working on new games with Activision Blizzard's intellectual property and the division hopes to release new games soon.

For fiscal 2017, analysts are looking for revenue of $6.42 billion and earnings of $1.95 per share. Next year, revenue is expected to jump 10% to $7.06 billion. The company has beaten its own guidance in 21 out of the last 22 quarters and topped the consensus estimate 19 out of 22 quarters.

I think 2017 is going to be a tough year for Activision Blizzard. The company has no new releases planned in the first half of the year. Call of Duty is expected to be refreshed in the second half and gamers are expecting Destiny 2 to launch in the fall. But, so far, there don't seem to be any major releases to drive the shares higher in the meantime. Investors must look towards next year, when the company has a full slate of new and refreshed titles.

At the current quote, the stock already prices in a lot of good news. The shares are trading at 23x fiscal 2017 estimates and 19x 2018 estimates of $2.36. For the time being, I think the stock is played out.

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