What's Wrong with Activision Stock?

Activision (NASDAQ:ATVI) looked like a star performer throughout the last year. That all changed when stocks headed south. The gaming firm took a few missteps that threaten growth prospects.

Q3 results, posted on Nov. 8, signaled weakness in the period and headwinds ahead. Although bookings met expectations, Q4 bookings are 13% lower year-on-year. Activision expects bookings for the year slightly below consensus, at $7.48B compared to $7.49B.

CoD initial sales started on the weak side. And Destiny is free for PC users. Management recognized its inability to properly manage Destiny’s growth. Since taking a hands off approach over the last six months, active users improved and the game is getting better traction. On Jan. 10, the company decided to give up its rights to the game and transferred it to Bungie.

Transferring Destiny is ultimately beneficial to both firms. Activision needs to re-establish growth on its core titles. It needs to think of how to resonate game play with customers instead of thinking only of profits. With the stock down by over 45%, the company will not have profits as its first priority.

Getting gamers back and getting them to spend on worthwhile things will lead to revenue growth. Happier customers will restore profit growth.