Activision-Blizzard (NASDAQ: ATVI) has reported their earnings for Q4 2019.

Revenue was $2.708 billion which beat analysts’ targets of $2.675 billion.

EPS came in at $1.23 which beat analysts’ targets of $1.19.

Overall, the stock has performed rather mediocre for the past year — it has barely beaten out the S&P500 during a one-year time period. Whatever successes that Activision-Blizzard have achieved, however, have been overshadowed by its competitors who loom over it like big brothers. Those competitors are of course, Electronic Arts (NASDAQ:EA) and Take-Two Interactive (NASDAQ:TTWO).

 

The Looming Shadows of EA and Take-Two

We see from the one year chart that EA has handily outperformed Activision in stock price gains.

Source: YCharts

From a valuation standpoint, it seems that Wall Street is more favourable towards EA and its other competitor Take-Two.

Source: YCharts

Although Activision still posted a net positive change in cash, it is far outclassed by Take-Two and lags behind EA.

Source: YCharts

Exclusive Titles Are the Name of the Game

You may remember Activision from their famous video game titles such as the Call of Duty franchise. On the Blizzard side, the company is responsible for the wildly popular World of Warcraft MMORPG, as well as Diablo, another famous franchise. However, if any of these games sound a bit dated to you, perhaps you’re not the only one. Kids (as well as adults) these days are playing games like Apex Legends (made by EA) and Fortnite (made by Epic Games) instead of World of Warcraft.

The company has done well with their competitor to Fortnite and Apex Legends called Overwatch, but other EA exclusives like Battlefield are going right up against Call of Duty. EA also has the advantage of being super big on sports games like FIFA, Madden NFL, and NHL games. Activision needs a huge exclusive title hit and it needs one soon or else it risks being left behind.

 

Video Games Are Going Digital

The world has transitioned into an age of digitization and video games are no exception. EA has drawn some criticism lately of putting “lootboxes” into their video games. Lootboxes are essentially packages of digital goods that one can purchase with in-game currency (which can in-turn be purchased with real money) that allows the user to give special upgrades to their character or benefit them some way in the game.

The problem with lootboxes is that some users felt that they were being cheated after the items that came out of the box was not proportional to the amount of money they had to spend to acquire the box, since the items inside the box is unknown before the user decides to purchase it.

Although this is a black mark on EA’s push into the digital games realm, at least it demonstrates that EA is establishing a firm presence in online and digital games instead of focusing on traditional single player games. It cannot be denied that at least EA is making a lot of money from these new online games.

Activision is also trying their hand at going digital, although with limited success by comparison. In late 2018, Activision announced the next installment of the Diablo series with a mobile game called Diablo Immortal. The reaction from fans of the Diablo series was very negative since most people were expecting a proper full-featured Diablo game instead of a watered-down game designed for smartphones.

Even then, as of right now, February 2020, the game is supposedly still under development and has not been released. It is safe to say that Activision’s push into the digital realm has been facing some headwinds.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.