The day that many gamers have been waiting for has finally arrived. At midnight on Tuesday November 5th, consumers will finally be able to get their hands on a copy of "Call of Duty: Ghosts". The newest game from Activision Blizzard (ATVI) is a branch away from two successful franchises under the "Call of Duty" brand. The game has seen strong demand and is one of several reasons why I am extremely bullish on shares going forward.
Call of Duty: Ghosts
"Call of Duty: Ghosts" will be released nationwide on Tuesday November 5th. The game has racked up an impressive amount of pre-orders. On Amazon, the game currently holds the #1, 3, 20, 27, 32, and 84 positions in the site's top 100 games list. Here is a look at pre-order numbers from VGChartz:
Back in May, I wrote that "Call of Duty: Ghosts" would reward shareholders in May and November. The first part of that article has turned into a decent prediction, with shares seeing a slight rise in May and a return of 12% since the article. Now, with a successful launch and good reviews of "Call of Duty: Ghosts", shareholders should see a strong November and once again be rewarded.
"Call of Duty: Ghosts" is the newest game in the popular first person shooter franchise. The game is from Infinity Ward, the studio that also makes the games under the Modern Warfare umbrella. With the launch of this franchise, Activision will now have three separate "Call of Duty" brands. Here is a look at how recent sales of the "Call of Duty" franchise have looked:
Black Ops II (2012)
Black Ops II (2012)
Modern Warfare 3 (2011)
Modern Warfare 3 (2011)
Multiple Call of Duty Games Annually?
I believe Activision now faces an important decision that could cause great gains for shareholders. With three unique "Call of Duty" brands, is it wrong to think that Activision won't release two games per year? For example, Activision could release both a "Black Ops" and "Ghosts" game in say 2015. Otherwise, each franchise will only see one game released every three years.
"Call of Duty" continues to be Activision's biggest franchise and the top selling game year in and year out. The thing to watch for will obviously be how sales of "Ghosts" and reviews stack up against the other two "Call of Duty" franchises. I also believe the launch of "Titanfall" by Electronic Arts (EA) in 2014 will be worth watching for Activision executives and shareholders.
As I recently wrote, Electronic Arts is releasing "Titanfall" March 11th, 2014. With the recent launch of "Battlefield 4" in October, EA will now have two first person shooter games on the market in a less than 12 month span. If "Titanfall" is well received and EA releases "Battlefield 5" in 2014, I believe Activision should look hard at pushing the envelope and releasing "Call of Duty" games twice a year.
Now I know the initial reaction is that one game a year might be enough. After all, most games have just updated maps and weapons. However, in a fashion similar to sports franchises like Madden and FIFA, gamers continue to line up at midnight to buy the newest first person shooter game. Now if you're a gamer and reading this, the thought of two "Call of Duty" games released in a year might seem boring or take away from the franchise. However if you're a shareholder like me, you should see dollar signs in your eyes right now. Imagine two billion dollar games released ever year for Activision. This is definitely worth keeping an eye on.
Activision just released "Skylanders: Swap Force", the newest game in the company's popular interactive franchise. In its first week of sales, the game sold 184,094 copies on Nintendo Wii, 127,084 copies on the XBOX 360, 96,654 copies on the Playstation 3, and 31,815 copies on the Nintendo 3DS. These numbers are a good start to the popular game. With toy sales factored in, Skylanders continues to be one of the biggest revenue generating franchises every year.
"Destiny" will be released in 2014 and could become the newest blockbuster game from Activision Blizzard. The game from the creators of the "Halo" franchise is highly anticipated and continues to perform well at conferences and presentations. The game has over 200,000 pre-orders across three platforms according to VGChartz. For more on the game's potential, see my previous article here.
In 2014, Blizzard will have an expansion pack for popular game "Diablo III". The expansion pack, known as "Reaper of Souls" will bring a raised cap level, new storylines, and a new character class. With a rumored $30 price point, Blizzard should rake in cash from people playing the game on PC and consoles.
Titan Announcement at Blizzcon?
Another exciting catalyst for shares of Activision Blizzard is "Titan". The codenamed project from Blizzard has been a well-kept secret that investors and gamers are dying to hear more about. The MMORPG is expected to be Blizzard's new cash cow, replacing the once unbeatable "World of Warcraft". I have been patiently waiting details and have wrote earlier that I believe late 2013 would finally be the time we would get some clarity.
Although Activision Blizzard already has an exciting two months to end the year with prominent game launches ("Call of Duty: Ghosts", "Destiny"), I believe the company could provide gamers with details on "Titan". The company will hold its annual BlizzCon November 8th and 9th. This event is attended by gamers and also broadcast on pay-per-view and cable television. This would be the perfect time and place to share details.
I once thought that much of "Titan" was priced into shares of Activision Blizzard. However, with successful franchises across the Activision and Blizzard structures, the company is generating a ton of cash and enjoying some of the biggest game franchises of all time. "Titan" is the icing on the cake and a random moment catalyst. Expect a big jump in Activision Blizzard's share price when details are finally announced.
New Structure=Higher Earnings Per Share
Recently, Activision completed a deal to buy back part of Vivendi's ownership stake in the company. Vivendi, the French media conglomerate, had previously owned over 50%. After the buying of a large amount of shares, Activision Blizzard has cut Vivendi's ownership stake to 12%. The company's major shareholder will now be ASAC II, a consortium made up of CEO Bobby Kotick, Tencent, and others. ASAC II now owns 24.7%.
I wrote about this deal in a previous article, praising the value it would unlock. With the buyout of Vivendi's stake, Activision's earnings per share will be greatly boosted. In fact, Activision estimated a 23% to 33% positive impact to earnings per share estimates. Analysts previously were estimating earnings to hit $0.89. Activision's new guidance called for a range of $1.01 to $1.09.
Analysts on Yahoo Finance were projecting fiscal 2014 earnings to hit $1.26. A positive impact of 28% (mid-range), due to the elimination of Vivendi's large stake, would bring that estimate up to $1.61. With shares trading at $16.70, a forward price to earnings is flirting with only 10x. This is relatively low for Activision's recent history and could provide an investing point for value investors, as Activision now sits at a low price to earnings and offers a decent yield of 1.1%.
Shares of Activision Blizzard sit at $16.70 at the time of writing. Over the past 52 weeks, shares have traded as high as $18.43. As the article title implies, I believe shares could run past this mark over the next six months. After a mediocre range for shares during the past five years, shares appear ready to break out once again. From 2001 to 2008, shares had six splits and were up over 500% in that time. While I don't see an easy double here for an $18 billion dollar company, I do see a possible 25% gain in six months. Back in May when I first highlighted "Call of Duty: Ghosts" I said, "I fully believe that with a strong lineup of games going into 2014, which includes "Call of Duty: Ghosts" and "Destiny", the company will hit $16 and not look back." I stand behind this and believe investors should see the upside soon.