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Lower CoD Expectations Has Brean Trimming Estimates on Activision (ATVI)

November 29, 2012 10:15 AM EST Send to a Friend
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Price: $22.24 -0.31%

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Activision Blizzard (Nasdaq: ATVI) is a little weaker today amid a Sterne Agree downgrade earlier and as Brean Murray commented on Call of Duty: Black Ops 2 sales.

According to Brean, COD BLOPs sales might come in flat to lower when doing a year-over-year comparison. Slowing sales for the World of Warcraft expansion Mists of Pandaria aren't aiding Brean's opinion at all and the firm now thinks that Skylanders sales will have to be big to stabilize the stock.

Not that it needs too much stabilizing. Activision has been range-bound amid anticipated upside in the fourth quarter. Brean comments, "We continue to believe that Activision is the best run company in the business and that investment over the past few years in its digital strategy for multiple franchises will allow the company to continue to generate approximately $1 billion in annual FCF."

Fourth-quarter estimates have been trimmed modestly by the firm. EPS moves from 74 cents down to 72, while revs ease from $2.52 billion to $2.5 billion. The Street is at EPS of 72 cents and revs of $2.45 billion. Brean is also anticipating a guide-down for FY13 estimates, commenting, "[t]he company faces difficult comps with Diablo III, which has sold in more than 10 million units during 2012, and a less than anticipated launch of WoW expansion Mists of Pandaria. The only Blizzard title currently scheduled for 2013 is Starcraft II sequel Heart of the Swarm, which is one of the smaller Blizzard packaged good releases." The firms is modeling FY13 sales of $4.4 billion and EPS of 95 cents.

Brean maintains a Buy rating on Activision, with a price target of $15. Shares are down about 2 percent Thursday.




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