Activision’s (ATVI) Call of Duty remains one of the most successful franchises and, since its launch in 2003, has been a major revenue earner.
The previous version of Call of Duty released during the holiday season last year lifted quarterly results. Reported sales outperformed the Zacks Consensus Estimate by 2.35% on the strength of Call of Duty: Ghosts and some other games. Earnings also benefited, beating our estimate by a healthy 8.57%.
A similar scenario is expected this year post the release of Call of Duty: Advanced Warfare. Another factor that needs to be taken into consideration is the reported absence of competition from Electronic Arts’ (EA) Battlefield series. Last year, EA released Battlefield 4 during the holiday season.
Reportedly, both EA and Take-Two Interactive (TTWO) have postponed the launch of their much-anticipated games Battlefield and Evolve to 2015. So less competitive pressure in the first person and third person video shooter game category should work in favor of Activision this year.
Also, Activision’s latest release, Destiny garnered more than $325 million globally in the first five days, per Chart-track and the company’s internal estimates. This should positively impact the top line.
Among the prominent U.S. game developers and publishers, Activision has one of the best product pipelines for the upcoming holiday season. The company is set to launch World of Warcraft: Warlords of Draenor, the newest expansion in the epic franchise, which, reportedly, has already been pre-purchased by over 1.5 million subscribers.
So the onus is on franchises like Call of Duty and Destiny to take the company forward.
However, Activision’s limited presence in the mobile gaming segment, higher adoption of free-to-play games and significant competition from the likes of EA, Glu Mobile (GLUU) and Take-Two Interactive are the major headwinds in the near term.
Currently, Activision has a Zacks Rank #3 (Hold).
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