Activision Blizzard Inc.
(
ATVI
) has released
Call of Duty: Black Ops II
, which is claimed to be "the most ambitious Call of Duty ever."
The game is already off to a great start and is being made
available through 16,000 retailers, including 4,400 stores of
video game retailer
GameStop Corp.
(
GME
).
Call of Duty: Black Ops II
is laden with new features, innovative game play and is set in
the futuristic world of 2025. The game can be played in both
single player as well as multiplayer modes. The game is available
on
Microsoft
's (
MSFT
) Xbox 360 and
Sony
's (
SNE
) PlayStation 3 gaming systems and PCs. It will be available for
Nintendo's Wii U from November 18, 2012.
First Day Performance; Ratings
Right after its release, thousands of gamers played the game
and encouraged Activision's management to eye new records.
Activision has forecasted the game to be a greater success story
than
Call of Duty: Modern Warfare 3
. Total sales of
Modern Warfare 3
exceeded $400 million on the first day of its release.
The latest
Call of Duty: Black Ops II
seems well positioned to topple the record. According to
Bloomberg, GameStop has already sold in excess of 1 million
copies of
Call of Duty: Black Ops II
on the first day.
The Entertainment Software Rating Board ("ESRB") has proffered
an "M" ("Mature") rating to the game. Metacritic has provided a
Metascore of 85 for the Xbox 360 version and has shared positive
reviews for the PS3 version as well. These positive ratings
indicate that the game is likely to be popular, generating
incremental sales going forward.
Call of Duty Franchise
The Call of Duty franchise has one of the most ardent fan
followings and was one of the most-played games in 2010. Now
touted as the most valued entertainment property, Call of Duty
has already raked in more than $6 billion in sales (life to
date). It is expected that each new game released under this
franchise will significantly increase the cash inflow for
Activision.
However, overexposure to the game might eventually tire the
gamers due to its periodic launches every year. Moreover,
Activision is heavily dependent on the Call of Duty franchise and
any anomalies in the sales of the same will most likely affect
the company's top line.
Our Recommendation
We believe that Activision's expanding product portfolio will
boost top-line growth over the long term. The company has a
strong product pipeline for the upcoming holiday season, which
may be expected to drive the top line in the near term.
Activision expects its new title releases in October, namely
007 Legends
,
Skylanders Giants
,
Cabela's Dangerous Hunts 2013
,
Cabela's Hunting Expeditions
and
Transformers Prime
to drive results in the next quarter. Moreover, sales of
Call of Duty: Black Ops II
coupled with
Wipeout 3
and
Family Guy: Back to the Multiverse
would be incrementally beneficial for the company's top-line
growth.
However, continued softness in the video game industry,
limited presence in the mobile gaming segment, higher adoption of
free-to-play games and significant competition from
Electronic Arts Inc.
(
EA
) are the major headwinds going forward.
We prefer to have an Outperform recommendation over the long
term (6-12 months). Currently, Activision Blizzard has a Zacks #3
Rank, which implies a Hold rating in the short term.
ACTIVISION BLZD (ATVI): Free Stock Analysis
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GAMESTOP CORP (GME): Free Stock Analysis
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