Activision's WoW to go Mobile - Analyst Blog

By Zacks Equity Research,

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Activision Blizzard Inc. ( ATVI ) is toying with the idea to bring its most successful and widely-played massively multiplayer role paying game (MMO), World of Warcraft (WoW), to mobile devices, according to Forbes. Though its subscription base dwindled to 10.2 million in December 2011 from over 12 million in December 2010, yet the game boasts of one of the highest subscriber bases among the present generation of MMOs.

The World of Warcraft has been competing with Electronic Arts Inc. 's ( EA ) Star Wars: The Old Republic , which has also garnered a huge publicity and significant subscriber base since its release in December 2011. Moreover, the emergence of free to play MMOs by social game makers like Zynga Inc. ( ZNGA ) has also been eating into the market share that Activision enjoys.

According to ABI research, mobile gaming is expected to generate $16.0 billion in revenues by 2016, a massive increase from approximately $5.0 billion reported in 2011. On the other hand, advertising spending on mobile games is expected to reach approximately $900.0 million by 2015. With the growing popularity of hand held devices, Activision's decision to go mobile seems to be a prudent idea in the present context.

Additionally, if World of Warcraft goes mobile, gamers will get to play the game on the move, leading to increased popularity and subscriber base, in turn generating a recurring revenue stream for the company. This also might prompt other big publishers to follow suit and provide some of the biggest names of MMO through mobile for the avid gamers.

We expect that the company's continued initiatives to expand in the digital online business segment will pay rich dividends over the next 12-18 months. A healthy product pipeline for 2012 will also boost Activision's top-line growth in the long term.

However, we believe that Activision's limited presence in the social and mobile gaming platforms will also impact its performance in near term. We expect Activision to continue to face significant competition from both EA and Zynga in the mobile gaming sector going forward.

Thus, we maintain our Neutral rating over the long term (6-12 months). Currently, Activision has a Zacks #3 Rank, which implies a 'Hold' rating in the short term (1-3 months).

ACTIVISION BLZD ( ATVI ): Free Stock Analysis Report
ELECTR ARTS INC ( EA ): Free Stock Analysis Report
ZYNGA INC ( ZNGA ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: ATVI , EA , ZNGA

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