Five Reasons Activision Will Move Higher This Year

If you're reading this, you probably know that Activision (ATVI) is one of the few companies out there still smashing analysts' earnings estimates. On Thursday, the world's leading video-game software publisher delivered a stellar Q1 report, beating handily on both the top and bottom lines, driving a nice pop in the stock today.

But more importantly, the conference call gave us multiple reasons the stock is going significantly higher this year.

Here are just five of them: (and there are a lot more!)

1) Guitar Hero: Van Halen Has a Timeline

This game was previously leaked by the German ratings board, but Activision President Michael J. Griffith gave us what we really needed - a timeline. The title will be released in the back half of the year, giving Activision's already-strong holiday lineup the equivalent of a B12 shot. Guitar Hero fans, myself included, have been hoping for this game for a long time and it will no doubt be a multi-million unit seller.

2) DJ Hero Will Help European Efforts

Like Guitar Hero: Van Halen, DJ Hero was an expected title lacking a release date, but we learned yesterday morning that it will in fact be out this year. More importantly, on the call, Activision noted that "DJ Hero is being developed by a European team and will offer more localized content and talent than any other game in the franchise’s history." This strategy is right on the money, and I expect DJ Hero to be an international smash because of its inclusion of non-rock genres like hip hop, R&B, and dance music. Expect it to show up in your local bar on the day of release.

3) Tony Hawk Is Coming Back

It was extremely smart of Activision to give the Tony Hawk skateboarding series a rest last year after being shown up by Electronic Arts' (ERTS) innovative Skate, but now Tony is on his way back. This provides a year-over-year comp against nothing, and if TH shows significant improvement, it could sell into the 2+ million unit range.

4) The Company Has Ambitious Plans for Blur

In 2007, Activision acquired Bizzare Creations, developer of the truly excellent Program Gotham Racing series for the Microsoft (MSFT) Xbox and Xbox 360. The UK-based production house is now busy completing a new racing title, Blur, for Activision.

The company's take? "From a business perspective, we are targeting Blur to do for racing what Call of Duty did for shooters." That's insanely ambitious, but given what Bizarre accomplished with PGR, they can probably get halfway there. A game half as successful as Call of Duty is still more successful than 99% of the stuff out there.

5) Small Guys Are Being Pushed Out

Here's a key quote from CEO Bobby Kotick: "...on the triple A titles, on the big propositions, this is an environment, as I said before, where the trade will disproportionately support those titles, potentially at the expense of smaller titles." This is important because Activison has so many AAA blockbuster titles on the way, notably Call of Duty: Modern Warfare 2. Bad for the little guys, but good for this one.

Disclosure: I'm long ATVI and I plan on buying a heck of a lot more.

Comments

[Windsun33:]

Much of the profit that ATVI got was from subsciption games such as World of Warcraft. Subscriptions - after reaching an all time high of 11.5 million - have started to drop off, supposedly down to near 10 million. Other sub games are in development but will not hit the shelves for probably 2-3 years. So while ATVI looks good for now, I expect a drop by the end of the year.

I am holding what ATVI I have but am not buying more.

May 10 12:59 PM

[Michael Comeau:]

Seasonal trend is very favorable for them - I expect a strong rally through November at the very least - they will guide up regularly throughout the year.

May 10 11:10 PM

[ArtfulDodger:]

MC:

Thank you for pointing this info out about ATVI. I have owned it in the past, but have not looked at it in a while.

I like it when someone touts a stock and owns it!

Thank you!

May 11 08:48 AM

[borisb:]

The market capitalization of this company exceeds $13 Billion and these 4 unproven niche titles may not move the neddle much.

May 27 09:17 PM