Earnings Preview: Activision Blizzard

Aug. 3.11 | About: Activision Blizzard, (ATVI)

Activision Blizzard (NASDAQ:ATVI) is expected to report Q2 earnings after the market close on Wednesday, August 3 with a conference call scheduled for 4:30 pm ET.


The consensus estimate is 5c for EPS and $599.32M for revenue, according to First Call. On May 9, Activision had forecast Q4 adjusted EPS of 4c on revenue of $575M. The company also raised its FY11 guidance to EPS of 73c on $3.95B in revenue. Activision typically is conservative with its guidance. That outlook did not include a new game from Blizzard expected in 2011. Current FY11 consensus: 75c/$4.40B. Activision has a history of beating or at least meeting Wall Street's expectations.

Analyst Views

Deutsche Bank expects Activision to report Q2 results in-line with its $600M revenue estimate and better than expected profits. The firm's EPS estimate is 5c. Deutsche believes the top-line will be aided by continued Black Ops game sell-through and online/subscription revenues. The firm sees the bottom line benefiting from opex savings and lower share-count due to stock repurchases. Conference call focus: 1) World of Warcraft subscriber trend and the effect of June price changes on trials, 2) pre-order update on CoD:MW3, especially the market's concern vs. competition, and 3) potential for Diablo 3 launch and beta sign-ups. Deutsche expects minimal changes to its model post Q2 as most of the title action is in Q4 of 2011. The firm expects a strong holiday season lineup and Blizzard to drive growth in 2012. As such, Deutsche believes that management guidance for 2011 could prove conservative. The firm rates Activision a Buy with a $15 target.