Activision Blizzard's (
publishing division recently announced that according to data
available from market research firm NPD group, the
franchise has crossed the coveted $500 million milestone in
retail sales, much faster than any other kids' game currently in
toy sales also outperformed the popular toy lines of Beyblades,
WWE and Star Wars, according to company estimates and supported
by data available from the NPD group and Gfk Charttrack.
According to NPD,
, a sequel to the
Skylanders Spyro's Adventure
earned more than $195.0 million in 2012. Moreover, the
movie was one of the best kids' films in the holiday season, as
Apart from winning a number of awards, the game also featured
in the "Holiday Hot Toy List" of Toys"R"Us. We believe that the
popularity of the
franchise lies in the novelty of the concept of bringing toys to
life. Moreover, Activision's timely initiative of rolling out a
mobile version of
Skylanders Cloud Patrol
iTunes App store and
Kindle Fire also enhanced its popularity in our view.
The success of
comes at an important time for Activision. Of late, the company
has tasted success with its blockbuster first person shooter
Call of Duty: Black Ops 2
, which topped the NPD's top 2012 games list.
The strong performance from
Call of Duty
coupled with the success of
is expected to have driven Activision's top-line growth for 2012.
Currently, Activision expects sales of $2.41 billion for the
fourth quarter and $4.81 billion for the full year.
Nevertheless, we note that
Call of Duty
is an aging property. Moreover, we believe that the shooter
gaming market may face significant decline in sales following the
Connecticut school shooting incident that left 28 people
(including 20 children) dead on December 15, 2012. The tragic
incident has brought shooting franchises such as
Call of Duty and
Electronic Arts' (
Medal of Honor
under strict scrutiny for using weapons and promoting violence
In such a scenario, we believe that franchises such as
, which is mainly targeted at kids, has significant opportunity
to grab market share going forward.
not only diversifies Activision's gaming portfolio but also
expands its revenue earning source from the retail sales of
Activision is expected to benefit from its strong product
pipeline in 2013. In addition to
, games such as
Cabela's Dangerous Hunts 2013
Cabela's Hunting Expedition
will be incrementally beneficial for the company going
However, continued softness in the video game industry,
sluggish macroeconomic conditions and Activision's limited
presence in the mobile and social gaming segment remain headwinds
going forward. Thus, we remain Neutral over the long term (6-12
Currently, Activision has a Zacks Rank #3 (Hold).
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