Activision Blizzard Inc.’s (ATVI) release of Call of Duty: Modern Warfare 3 has set the cash register ringing once again, as sales touched $400 million being on the very first day. According to Charttrack and retail customer sell-through information, the game has already sold 6.5 million units in North America and the U.K. alone on the first day of its release.
The fandom of Call of Duty franchise gets reflected in the huge pre-order demand and the reported sales figures, which met analysts’ expectations.
For the third consecutive year, this franchise has set a new first-day sales record, following the release of Call of Duty: Modern Warfare 3 last Tuesday. Last year, the release of Call of Duty: Black Ops fetched first-day sales of $360 million on 5.6 million units sold. A year prior to that, with the release of Call of Duty: Modern Warfare 2, Activision had reported first day sales of $310 million with 4.7 million units being sold.
Though Activision’s Modern Warfare 3 was pitted against Electronic Arts Inc.’s (ERTS) Battlefield 3 (5 million units sold in the first week of release globally), which was released in October 25, it seems that the former is way ahead in terms of units sold. Most experts believe that Electronic Arts will sell a total of 10-12 million units of Battlefield 3, while Activision will sell more than 25 million units of Modern Warfare 3.
Another set of analysts believe that the release of Call of Duty games every year might eventually tire the gamers due to the overexposure of the game. Nonetheless, Activision has plans of releasing two games of the same franchise in 2012.
Call of Duty: Modern Warfare 3 has a price tag of $59.99, with high-definition versions for Microsoft Corp.'s (MSFT) Xbox 360 and PCs and Sony Corp.'s (SNE) PlayStation 3. Additionally, the game is also available on Nintendo's Wii console for $49.99. Plus, the game has a version for Nintendo's DS handheld called Call of Duty: Modern Warfare 3: Defiance, which comes at a price of $29.99.
Our Take
We believe the release of Activision’s famous franchise games will benefit the company in the forthcoming quarters and drive its top-line growth.
We expect the company’s continued initiatives to expand the digital online business segment to pay rich dividends over the next 12-18 months. A healthy product pipeline for the holiday season will help Activision tap the strong demand, thereby driving its top-line growth.
However, Activision continues to face tough competition from Electronic Arts Inc. and Take-Two Interactive Software Inc. (TTWO), which will act as a headwind going forward. Moreover, a gloomy macro-economic environment in North America and Europe, increasing competition and weak video game results during the last 12 months, as well as Activision’s limited presence in the social and mobile gaming platforms will act as headwinds in the near term.
In the long run, we maintain our Neutral rating. We currently have a Zacks #2 Rank for Activision Blizzard Inc., which implies a Buy rating in the short term (1-3 months).
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