Q4 Preview: Activision Blizzard (ATVI) Hot Game Sales May Slow, But Analysts Mostly Positive On Valuation and Upcoming Launches

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ATVI Hot Sheet

Rating Summary:
6 Buy, 4 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
Up: 0 | Down: 0 | New: 0

Shares of Activision Blizzard Inc. (Nasdaq: ATVI) are trading up roughly 1 percent Thursday ahead of the release of its fourth-quarter results after the closing bell.

The Wall Street quarterly consensus for Activision Blizzard is $0.56 per share in earnings on $2.20 billion in sales. For the fourth quarter of 2010, the company reported earnings of $0.53 per share on $2.55 billion in total revenues.

For the full year 2011, analysts on the Street are currently estimating a loss of $0.86 per share in earnings on $4.28 billion in total sales.

The fourth quarter conference call is scheduled for 4:30 pm ET. Dial: 888-481-2845 for U.S. and Canada and 719-325-2122 for International. Passcode: 8472934

According to data from Bloomberg, shares of Activision Blizzard have twenty-one ratings, two Hold ratings and zero Sell ratings. The average price target on shares of ATVI is $16 with a range from $14 to $19.

Analyst Comments:

Goldman Sachs' earnings estimate for the quarter is inline with the Street's as the firm forecasts the demand for Call of Duty has slowed along with the number of WoW subscribers. An analyst at Goldman comments, "We're not expecting a material beat on Q4 results given some slowing of Call of Duty growth in December in the U.S, but Skylanders sales were decent with a promising toy purchase attach rate. WoW likely lost subs again, but at a slower pace than Q3, and may be stabilizing in Jan."

For fiscal 2012, the firm anticipates management will offer an earnings guidance range of $0.90-$0.95, below the consensus of $0.95. For the year, Goldman forecasts earnings of $0.97 on over $1 billion in buybacks.

Goldman is reaffirming its Buy rating and $16 price target on the company going into earnings.
Following management's comment on December 12th that Call of Duty MW3 sales surpassed $1 billion, Wedbush anticipates solid sales. For the quarter, the firm estimates earnings of $0.55 per share on $2.17 billion in sales. Wedbush doesn't predict the release of Star Wars: The Old Republic has taken sales away from WoW yet.

An analyst at Wedbush reports, "Activision shares continue to trade at an extremely low multiple due to high revenue concentration among Call of Duty packaged goods sales and World of Warcraft. In our view, Elite and Skylanders this year, as well as multiple Blizzard releases and a Bungie game next year should allay some of those concerns."

Wedbush is reiterating its Outperform rating and $19 price target ahead of the release.
Deutsche Bank believes the ATVI's quarterly results will fall inline with expectations and looks for management to give some clarity on the timing of Diablo 3 launch during its conference call. The firm also hopes management will offer clarity on ther potential for expansion packs for StarCraft and Warcraft in 2012, and their strategy on Warcraft sub turnaround from roughly10 million.

An analyst at Deutsche highlights, "Since it does appear as though Diablo 3 will launch outside of 1Q, we do think there may be some revenue shifts from 1Q into potentially later in the year. However, for the full year, we do think the company remains committed to mid single-digit revenue and double-digit EPS growth in 2012."

Deutsche is maintaining its Buy rating and $16 price target on the company going into the report.