The coronavirus outbreak continues to be a blessing in disguise for the video gaming industry. According to a report from The NPD Group, the video game industry, including packaged media, digital, consoles and accessories, saw strong sales in the second quarter of 2021 with people spending $14 billion in total. The figure inched up 2% year over year. Understandably, the ongoing health crisis has been a blessing in disguise for this space so far.
Riding the trend, Activision Blizzard (NASDAQ:ATVI), Inc. ATVI, which reported second-quarter 2021 earnings results on Aug 3, has delivered better-than-expected results. Moreover, it has returned around 3.3% since the earnings release.
Q2 Earnings at a Glance
The company reported second-quarter 2021 non-GAAP earnings of $1.20 per share, up 48.1% year over year. Consolidated revenues rose 18.8% year over year to $2.29 billion. Adjusting for revenues from non-reportable segments, net effect from the recognition of deferred revenues and elimination of intersegment revenues, total revenues were down 7.5% year over year to $1.85 billion. The Zacks Consensus Estimate for earnings and revenues was pegged at 76 cents per share and $1.88 billion, respectively.
However, Activision Blizzard witnessed a year-over-year decline in Monthly Active Users (MAUs) during the quarter ended Jun 30, 2021. Overall MAUs came in at 408 million in comparison with 428 million as of Jun 30, 2020. Moreover, the company’s net bookings decreased 7.6% year over year to $1.92 billion. In-game net bookings were $1.31 billion, down 4% year over year.
Pandemic Favorable for Video Gaming Industry
It also seems like the boom in the video gaming space may remain in the post-pandemic era as the outbreak has changed the lifestyle and preferences of Americans to a large extent.
Game developers are continuing to innovate and attract users every day and also retain old ones. They are increasing engagement for existing players by providing new titles, levels, arenas or environments as the games require at regular intervals.
Activision (42.5% of revenues) revenues decreased 20.5% year over year to $789 million. The division had 127 million MAUs as of Jun 30, 2021, up 1.6% year over year. The segment’s top-line growth was driven by Call of Duty: Black Ops Cold War and Warzone in-game revenues, strong premium sales, and Call of Duty Mobile.
Guidance
For third-quarter 2021, Activision Blizzard expects non-GAAP revenues of $1.97 billion and earnings of 75 cents per share. Net bookings are expected at $1.85 billion.
For 2021, Activision Blizzard anticipates non-GAAP revenues of $8.51 billion and earnings of $3.54 per share. Net bookings are expected at $8.65 billion.
ETFs to Watch Out For
Against this backdrop, investors can take a look at the following ETFs:
VanEck Vectors Video Gaming and eSports ETF ESPO
The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Video Gaming and eSports Index, which is intended to track the overall performance of companies involved in video game development, esports, and related hardware and software. It holds 26 stocks in its basket. Activision Blizzard holds the sixth spot in the fund, with 5.05% weight. With AUM of $751.1 million, the fund charges 55 basis points (bps) in expense ratio. The fund has lost about 0.9% since Activision Blizzard’s earnings release (read: ETF Areas in Spotlight as Delta Variant Cases Rise).
Global X Video Games & Esports ETF HERO
The fund seeks to invest in companies that develop or publish video games, facilitate the streaming and distribution of video gaming or esports content, own and operate within competitive esports leagues, or produce hardware used in video games and esports, including augmented and virtual reality. It holds 41 stocks in its basket. Activision Blizzard holds the fourth spot in the fund, with 5.78% weight. With AUM of $582.5 million, the fund charges 50 bps in expense ratio. The fund has lost around 1.9% since Activision Blizzard’s earnings release (read: Video Gaming ETFs to Surge on Soaring Sales Amid Pandemic).
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Activision Blizzard, Inc (ATVI): Free Stock Analysis Report
Global X Video Games & Esports ETF (HERO): ETF Research Reports
VanEck Vectors Video Gaming and eSports ETF (ESPO): ETF Research Reports
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