Earnings Preview: Activision Blizzard

Activision Blizzard (ATVI) is expected to report Q3 earnings after the market close on Thursday, November 5, with a conference call scheduled for 4:30 pm ET.

Guidance

The consensus estimate is 4c for EPS and $724.04M for revenue, according to First Call. On the company's last earnings call management provided Q3 guidance of 3c for EPS and $700M for revenue. They also provided FY09 guidance, which they later reaffirmed on Sept. 21, calling for 63c in EPS and $4.5B in revenue. At that time, management urged investors to be cautious and prudent in evaluating the company's forecasts and projections. The company was seeing global demand for "Modern Warfare 2" exceed expectations, and strong attach rates for the recently launched "Call of Duty: World at War" map packs.

Analyst Views

"The company had strong Q2 catalog sales and Q3 releases, likely driving publishing revenues to near flat year-over-year, and even with the suspension of 'World of Warcraft' in China for much of the quarter, the Blizzard business should contribute $230M or more in revenue," wrote Wedbush Morgan analyst Michael Pachter in a note to investors. He rates Activision a Buy. The game was suspended because Chinese regulators have been fighting over the right to oversee the game in the country.

Looking froward: "Call of Duty: Modern Warfare 2" comes out on Nov. 10. Some analysts estimate it could bring in as much as $500M the week it launches, which would put it on par with Rockstar Games' "Grand Theft Auto IV" as one of the most lucrative entertainment launches in history. Like most video game companies, Activision brings in much of its revenue during the holiday season, so investors will be eyeing the company's outlook for the current quarter in the earnings report. That will show just how badly the recession, Wii fatigue and the delays of some hit games into 2010 has hurt the industry.

Comments

[StockMaster...:]

There has not been a game worth buying in a while. Modern Warfare 2 is going to exceed expectations in sales in a huge way because the consumer's appetite for a great game is getting BIG since nothing has come out recently.

Nov 05 02:25 PM