Interactive games and entertainment producer Activision Blizzard (NASDAQ:ATVI) stock was recently punished on its Q2 2021 earnings report presenting an opportunity for prudent investors. The Company leadership appears to have their hands full putting out fires dealing with the damaging allegations stemming for a sexual harassment and discrimination lawsuit filed by California’s Department of Fair Employment and Housing (DFEH). This distraction has been dampening the stock performance and overshadowed the conference call where the CEO spent most of his time defending the Company culture with proactive processes in place. The Company is enjoying strong business operations as its legacy brands including Call of Duty, World of Warcraft and Candy Crush are pumping on all cylinders. The lawsuit allegation stretch back to 2014 to 2018 and the Company claims the culture has changed dramatically since then, while social media amplifies awareness of these claims. While Activision was a pandemic winner, the question of whether it will maintain its growth through the reopening is the key question on investor’s minds. The Company provided mixed guidance moving forward despite the blowout quarter, shares still sank. Prudent investors can the negative sentiment to gain exposure at opportunistic pullback levels.
Q2 FY 2021 Earnings Release
On Aug. 3, 2021, Activision released its fiscal second-quarter 2021 results for the quarter ending June 2021. The Company reported earnings-per-share (EPS) profits of $1.12 beating analyst estimates for $0.82, by $0.30. Revenues fell (-$7.7%) year-over-year (YoY) to $1.92 billion beating the $1.89 billion consensus analyst estimates. Activision CEO Bobby Kotick commented:
“With respect to our financial performance, we are pleased that the company continued to deliver strong results in the second quarter, and we are raising our outlook for the year.”
Mixed Guidance Raise
Activision lowered Q3 2021 EPS to $0.68 versus $0.75 consensus analyst estimates on revenues of $1.85 billion versus $1.81 billion consensus analyst estimates. The Company see full-year 2021 EPS of $2.91 (up from $2.83) versus $3.04 consensus analyst estimates. Activision raised its full-year 2021 EPS to $3.08 from $2.91 versus $3.04 consensus analyst estimates on revenues to come in around $8.65 billion versus $8.76 billion consensus estimates.
Conference Call Takeaways
Activision Blizzard CEO Bobby Kotick announced new leaders at Blizzard:
“Jennifer Oneal and Mike Ybarra have been named the new Co-leads of Blizzard. Jen has been with the company for 18 years. She is the former head of our studio, Vicarious Visions, and most recently had Production and Development Oversight for our Diablo and Overwatch franchises. Mike has been in our industry for over 20 years, including in leadership roles within Microsoft Xbox division, and at Blizzard as General Manager of Battle.net. I'm also pleased to have Allen Adham here today. As most of you know. Allen is one of the founders of Blizzard. After a 12-year hiatus, Allen returned to Blizzard to lead our new product and new IP incubation efforts. Each of these individuals brings vast industry experience and tremendous integrity to their roles. They are the very best examples of leadership with character and accountability. I'm confident this team will ensure that Blizzard provides a welcoming, comfortable, and safe workplace that is essential to foster creativity and inspiration.”
Proactive Steps
CEO Kotick indirectly addressed the mounting sexual harassment lawsuit and accompanying allegations and proactive measures to ensure safety and compliance,
“In addition, we'll continue to investigate each and every claim and compliant that we receive. When we learn of shortcomings, we will take decisive action. And to strengthen our capabilities in this area, we'll be adding additional staff and resources. People will be held accountable for their actions. That commitment means that we will not just terminate employees where appropriate but will also terminate any manager or leader found to have impeded the integrity of our processes for evaluating claims and imposing appropriate consequences. Because our work cannot be successful without diverse voices, views, and talents, we made a commitment to consider diverse slates of candidates for all open positions. And we'll continue to add resources to ensure this occurs throughout the company. Over the past several years, we've made significant changes to address company culture, reflect more diversity within our leadership teams, and create environments conducive to reporting any type of misconduct.”
Commitment to Culture Change
CEO Kotick underscored his commitment to ensuring workplace safety:
“We've amplified internal programs that encourage employees to report violation. We've reinforced channels for employees to voice concerns in confidential and safe ways without any fear of retaliation. We're directing additional resources to our compliance and employee relations teams dedicated to investigating complaints. We pride ourselves on paying our employees competitively and fairly for equal or substantially similar work… And we conduct extensive anti-discrimination trainings, including for all employees involved in the compensation process. Our workplace initiatives are crucial to our continued success, and our leadership in this effort is my priority. Our workplace safety also remains our priority, and as we consider our return to work initiatives, we remain focused on providing the very best healthcare for our employees and their families. You have my unwavering commitment that we will continue to focus on serving our players and delivering the sustainable growth that you've come to expect. And we will take all necessary actions to foster a culture that is supportive and welcoming for all of our employees. And we expect to be the very best example for other companies to emulate.”
ATVI Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precision view of the playing field for ATVI shares. The weekly rifle chart collapsed on the Q2 2021 earnings reaction to bottom out near the $77.65 Fibonacci (fib) level. The weekly market structure high (MSH) sell trigger formed on the breakdown below $93.55. The weekly 5-period moving average (MA) is falling at $88.35 with lower Bollinger Bands (BBs) at $82.75 powered by the weekly stochastic mini inverse pup. The daily rifle chart has been in a downtrend that accelerated lower with a falling 5-period MA at $81.37. The daily market structure low (MSL) buy triggers above $83.90. The daily stochastic is again trying to cross up through the 20-band for an oversold bounce. Prudent investors can watch for opportunistic pullback levels at the $79.22 fib, $77.65 fib, $75.82 fib, and the $71.46 fib. The upside trajectories range from the $89.45 fib up towards the $107.46 fib level.