Activision Blizzard Inc. (ATVI:US), the largest U.S. video-game maker, rose the most since late 2008 after fourth-quarter net income beat analysts’ estimates amid gains from the latest “Skylanders” and “Call of Duty” titles.
The stock soared (ATVI:US) 11 percent to $13.41 at the close in New York time for the biggest jump since November 2008, after the company yesterday reported earnings tripled last quarter. The shares have gained (ATVI:US) 6.9 percent in the past year, as the Russell 1000 Index added 13 percent.
Activision has weathered an industry decline by updating existing top sellers and developing new ones and said (ATVI:US) yesterday it may consider “substantial” stock repurchases in 2013. The Santa Monica, California-based company recently announced a third installment of its “Skylanders” franchise, which has generated $1 billion in revenue from games and toys.
“‘Skylanders’ success can no longer be ignored and its 2013 iteration appears very strong,” Ben Schachter, a Macquarie Group analyst, wrote in an investor note today.
“The biggest surprise was new language in the announcement on potential capital returns, acquisitions and debt,” said Schachter, who upgraded the shares to outperform from neutral.
Activision, led by Chief Executive Officer Bobby Kotick since 1992, is 61 percent owned by Paris-based Vivendi SA, also parent of Universal Music. The French company has been under pressure from investors to boost its share price, and Chairman Jean-Rene Fourtou last July said “it’s a possibility” his company may sell Activision.
Activision “is considering or may consider during 2013, substantial stock repurchases, dividends, acquisitions, licensing or other non-ordinary course transactions” and related debt financings, according to yesterday’s statement.
“We are contemplating all ways to return capital to shareholders,” Kotick told analysts on a conference call.
Activision would need to borrow to purchase Vivendi’s stake, said Michael Olson, an analyst at Piper Jaffray Cos. (PJC:US), in a note on Feb. 5. The company may need to keep some of its cash to invest in new titles and cushion against unpredictable returns, said Olson, who is based in Minneapolis and has an overweight rating on the stock.
At the end of the quarter, the company had $3.96 billion in cash and $416 million in short-term investments.
Net income for the period soared to $354 million, or 31 cents a share, from $99 million, or 8 cents, a year earlier, the company said yesterday in a statement after the markets closed. Excluding some items, profit of 78 cents exceeded the 72-cent average of 22 analysts’ estimates compiled by Bloomberg.
Sales, excluding changes in deferred revenue, rose 7.6 percent to $2.6 billion, beating the $2.44 billion average estimate of analysts. Including those changes, revenue rose 26 percent to $1.77 billion.
In November, “Call of Duty: Black Ops 2” became the first game ever to generate $1 billion in sales in 15 days, the company said. “Skylanders Giants” was the No. 1 children’s title in the fourth quarter in Europe and North America, Activision said.
This quarter, the company forecasts profit of 10 cents a share, excluding some items, on sales of $690 million before taking into account changes in deferred revenue. Analysts also project profit of 10 cents on that basis, and revenue of $693 million.
To contact the reporter on this story: Cliff Edwards in San Francisco at firstname.lastname@example.org
To contact the editor responsible for this story: Anthony Palazzo at email@example.com