Activision surges in Q3 thanks to record COD sales

The news shaping the markets today

Ukraine accused Russia of looting vacant homes and occupying them in the southern city of Kherson. The US dollar index traded higher with continued geopolitical concerns.

Australia’s Westpac-Melbourne Institute Index of consumer sentiment fell by 6.9% to 78 in November, hitting the weakest level since April 2020 and exerting pressure on the AUD/USD forex pair.

Japan’s household spending grew by 2.3% in real terms in September, missing market expectations of 2.7%, which sent the JPY/USD pair lower in forex trading this morning.

The Philippines reported a decline in its unemployment rate to 5% in September, from 8.9% in the year-ago month. The jobless rate fell to its lowest since December 2019, lending support to the PHP/USD forex pair.

Mexico’s consumer confidence indicator came in unchanged at 41 in October. The MXN/USD pair declined slightly in forex trading this morning.

What’s happening: Shares of Activision Blizzard edged higher in after-hours trading on Monday, after the company reported its third-quarter results.

What happened: Activision Blizzard reported stronger-than-expected earnings for the latest quarter.

The developer of electronic games also issued an important update regarding its pending takeover by Microsoft.

How were the results: The Santa Monica, California-based company reported a double-digit decline in earnings for the three months ending in September, but the figure still topped market views.

• Adjusted revenues declined 7.7% to $1.735 billion but came in ahead of Street expectations of $1.69 billion.
• GAAP earnings contracted by 33% year-over-year to 55 cents per share, but exceeded the consensus estimates of 50 cents per share.

Why it matters: In January, Microsoft had announced plans to acquire Activision Blizzard for $95.00 per share, in an all-cash deal valued at $68.7 billion. The acquisition would elevate Microsoft to the third-largest gaming company in the world in terms of sales.

Over the weekend, a New York Post article mentioned concerns around Microsoft’s efforts to gain regulatory approval for the transaction. However, Activision said it expects the deal to close by June 2023.

Activision reported 13.33% growth in game net bookings to $1.36 billion in the third quarter, while net revenues from digital channels came in at $1.61 billion. Booking at its King business line rose 8% year-over-year, driven by the Candy Crush franchise.

The company closed the quarter with 368 million monthly active users.

Activision released “Call of Duty: Modern Warfare II” on October 28 and the much-anticipated game broke records to become the fastest-selling title in its franchise history.

The game crossed sales of $1 billion at the fastest in its flagship franchise, with a 40% rise in hours played during the first 10 days of its release.

Activision projected a 5% year-on-year decline in its GAAP revenues and 20% growth in bookings.

How shares responded: Activision’s shares rose 0.5% to $71.46 in after-hours trading, following the release of quarterly results. The stock has lost around 8% over the past six months.

What to watch: Markets expect the smooth closing of Microsoft’s acquisition of Activision.

Investors will also keep an eye on the upcoming big launches from the company, with another highly anticipated “Diablo IV” game scheduled for launch in 2023.

The markets today

Gold will be in focus today after settling higher on Monday

Context: Gold edged higher on Monday, building on gains recorded last week.

Details: Some softness in the US dollar supported gold on Monday, as the decline in the greenback makes the yellow metal more attractive for foreign currency holders. The ICE Dollar Index, which measures the greenback’s performance versus a basket of major rivals, fell around 0.7% to 110.11 on Monday.

Gold managed to build on last week’s gains after the Federal Reserve announced another big rate hike of 75 bps at its November meeting.

On Friday, the US Bureau of Labor Statistics also reported 261,000 job additions last month, beating average economist estimates of 205,000 jobs. However, the US unemployment rate rose to 3.7%, surpassing market expectations of 3.5%.

Gold futures for December delivery gained $3.90, or 0.2%, to settle at $1,680.50 per ounce on the Comex, closing at its strongest since October 11. December silver gained around 0.7% to close at $20.919 per ounce, reaching another record settlement since October 4.

December palladium climbed around 3.2%, to $1,897.50 per ounce, while January platinum gained 3% to $989.40 per ounce and Copper for December delivery declined 2.3% to settle at $3.6035 per pound on Monday, after gaining around 7.6% in the previous session.

What are expectations: Traders will keep an eye on the US mid-term elections. The US consumer price index data is also scheduled for release on Thursday. The US dollar will remain in focus, as movement in the currency impact the yellow metal.

Other Markets: European trading indices closed mostly higher on Friday, with the DAX 40, CAC 40 and STOXX Europe 600 up by 0.55%, 0.01% and 0.33%, respectively, and the FTSE 100 down by 0.48%.

Support & resistances for today

Market snapshot

What else to watch today

France’s balance of trade, current account, foreign exchange reserves, retail sales and payroll employment in private sector, Italy’s retail sales, Eurozone’s retail sales, Russia’s total vehicle sales and monetary policy report, US NFIB small business optimism index, Redbook index, IBD/TIPP economic optimism index and API’s crude oil stocks, Brazil’s auto production and auto sales, India’s balance of trade, as well as Argentina’s industrial production.