Earnings Preview: Activision Blizzard

| About: Activision Blizzard, (ATVI)

Activision Blizzard (NASDAQ:ATVI) is expected to report Q2 earnings after the market close on Thursday, August 2, with a conference call scheduled for 4:30 pm ET.


The consensus estimate is 12c for EPS and $834.79M for revenue, according to First Call. Last quarter Activision topped EPS estimates by 3c, marking the 4th straight quarter of beating estimates. The company is hoping to use this earnings announcement to snap a string of two-straight quarters of revenue declines. Revenue fell 1.5% in Q4 of FY11 and dropped again in Q1. Guidance for Q2 from the last earnings call is for EPS of 10c on revenue of $805M. The company had raised its 2012 EPS outlook a penny to 95c and revenue outlook to $4.53B from $4.5B.

Analyst Views

Wedbush expect the top-line beat to be driven by Blizzard sales, which the firm has modeled at $497M, up $184M from the prior year. However, given that Blizzard sold over 6.3M copies of Diablo III in its first week -- over 1.2M were WoW annual pass promos -- Wedbush's Blizzard revenue estimate is likely conservative. Other strong contributors will be CoD Elite, DLC -- one content collection in Q2 for Xbox 360, two for PS3 and PC -- and Skylanders which reported over $100M of revenue in Q1. Wedbush expects management to increase FY12 guidance for revenue of $4.53B and EPS of 95c by less than the Q2 beat. Wedbush continues to assign a low probability to the sale of Activision Blizzard by parent Vivendi, as, in its view, there are not any readily apparent buyers. Wedbush expects Vivendi to cause Activision to borrow as much as $5B and pay a special dividend, followed by a spin-off of Activision stock to Vivendi shareholders.

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