The Buying Opportunity For Activision Blizzard Shares Is Now

| About: Activision Blizzard, (ATVI)

Activision Blizzard (NASDAQ:ATVI) shares were flat on the day and barely moved during after hours, despite beating analysts adjusted earnings per share. For the first quarter, Activision Blizzard reported revenue of $1.17 billion, versus $1.5 billion last year. Net income came in at $384 million, a decrease from $503 million in last year's first quarter. Earnings per share, on a GAAP basis, were $0.33. Adjusted net income was $0.06 for the quarter. Activision Blizzard had previously forecasted $0.03 adjusted net income during its last conference call (02/09/12).

One of the biggest positives from the earnings call was the World of Warcraft subscriber base. Subscriptions of 10.2 million stayed the same as last quarter. Investors had worried that a new MMORPG game from Electronic Arts (NASDAQ:EA) based on Star Wars would hurt the long time champion. Subscribers are down from last year (11.4 million), but the fact that the company did not lose more subscribers from last quarter is a true victory. World of Warcraft remains a huge cash cow for the company and after seven years the game still commands over 10 million subscribers.

A new expansion pack for World of Warcraft called Mists of Pandaria is in Beta testing right now and will be released late 2012 or in 2013. The new expansion pack could increase WOW subscribers for the first time in awhile. In March, Blizzard renewed a contract with NetEase (NASDAQ:NTES) to continue bringing the game to China. The contract will extend for three more years after the current contract expires.

The newest Call of Duty game has an official release date. Call of Duty: Black Ops 2 will release on November 13th. Despite having a release date six months away, the game appeared on Amazon's Best Sellers list Wednesday at number nineteen. Activision has typically released huge blockbusters in time for the holiday season. Analysts are already talking about whether this new game can outsell all of the other Call of Duty games. Also announced is a free micro-transaction version of Call of Duty that will be available in China.

Call of Duty Elite was another huge bright spot for the company during the call. Ten million people (as of 04/30) have signed up for the new service from Activision. Two million of those subscribers have signed up for the premium membership. I discussed the Call of Duty Elite program in an article last June.

Spyro continues to be a huge growth story for Activison. Skylanders was the number one selling kids game in the first quarter across all platforms, with sales of accessories included. The company has sold $30 million worth of games and accessories for the Spyro game (as of 03/31). During the first quarter, the game and accessories was the number three game in terms of revenue. A quick look at Amazon's Best Sellers list any day will show several Spyro related figures in the top 100.

I discussed in details the power of the new game and brand in a recent article. The game continues to sell well as do the figures. Licensing power of the game has only begun with deals in place already from Frito-Lay and Toys 'R' Us. The Spyro brand contributed to the first quarter on a game and accessories basis. The new Skylanders: Giant game will be released in the fall in time for the holidays, and along with the new Black Ops 2 game will help ensure that Activision has two of the top wanted holiday gifts.

The second quarter will include sales of recently launched Prototype 2 and the Call of Duty: Modern Warfare 3 Content Collection 1. New games to be released in the second quarter includes

· Battleship - May 15th, based on upcoming movie

· The Amazing-Spiderman - June 26th, based on upcoming movie

· Diablo III - May 15th, long awaited sequel

Diablo III remains the number one game in the World in terms of current pre-orders. The game, according to VG Chartz, has over 725,000 games already sold. The game, which releases on May 15th, has 8000 retailers opening at midnight so customers can pick up the game and begin playing. Two million gamers tested Diablo III in Beta and the response was overwhelming positive. Back in March when Activision Blizzard announced a release date, sales really took off. The game has been on Amazon's (NASDAQ:AMZN) bestselling video game list since that time.

Prototype 2 was released last week and was on the global bestsellers list. The Playstation 3 version sold 186,185 copies, good for the fourth best sales of the week. The XBOX 360 version was the second best selling game of the week with 260,976 copies sold. For the first week, the game sold 447,161 games combined. I predicted Prototype 2 to sell 2.8 million copies in a December article. On May 29th, gamers will be able to download new content packs of weapons and accessories for Prototype 2. The packs will be for sale at a price point of $4.99. The Facebook page for Prototype has over 400,000 fans and continues to grow in popularity.

Also in the company's pipeline is a new free to play multiplayer game that has not been discussed often during conference calls. Bungie Studios, the makers of the HALO games, is also working on new video games. A new MMORPG game, called TITAN for now, could provide a great long term boost for the company and shares. It's hard to believe that World of Warcraft has been around for seven years. The company could use a new MMORPG game to boost monthly revenue.

There also remains other events that could play out over 2012 for Activision Blizzard. French media conglomerate Vivendi owns 61% of Activision Blizzard shares. Vivendi has recently talked about spinning off assets, which could be beneficial to Activision or hurt shares for the short term. Another possibility to move shares would be an acquisition. At the end of the quarter, Activision now sits on $3.5 billion and continues to rake in money from WOW subscribers, COD Elite subscribers and will see an increase from the Diablo III auction house.

New second quarter guidance from Activision Blizzard is $0.95 (GAAP) earnings per share on revenue of $4.53 billion. The company forecasts adjusted earnings for the second quarter to be $0.10.

I have recommended buying shares of Activision Blizzard several times this year. The stock was one of my top ten stock picks for the year. I also recommended buying shares based on the Diablo 3 game. My price target earlier in the year was $20. I remain a long term fan of Activision Blizzard shares and have been an owner of the stock for years. I have recently bought more shares of the stock. The time to buy Activision Blizzard stock is now. There will not be many dips below $12 after the release of Diablo III.

Disclosure: I am long ATVI.