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Activision's COD Sets Record Again - Analyst Blog

Monday, November 19, 2012

Activision Blizzard Inc.’s (ATVI) Call of Duty (“COD”) franchise has set the cash register ringing once again. According to Chart-Track and retail customer sell-through information, the sales of the recently-launched Call of Duty: Black Ops II exceeded $500 million on the very first day of its release.

This marked Call of Duty’s fourth consecutive year of breaking its own first-day sales record. Activision’s preceding games such as Call of Duty: Modern Warfare 3, Call of Duty: Black Ops and Call of Duty: Modern Warfare 2 had raked in $400 million, $360 million and $310 million, respectively, on the first day of their releases.

Going by the first day sales figure, the $1 billion sales target looks easy and we believe that the game will likely set another record in this category as well. Call of Duty: Modern Warfare 3 had achieved this feat in 16 days. Moreover, with Metascores (provided by Metacritic) of 83, 82 and 80 for the Xbox360, PlayStation 3 and the PC version, respectively, the game should significantly increase the cash inflow for Activision.  

The Call of Duty franchise is touted as one of the most valued entertainment properties and has already generated more than $6 billion in sales (life to date). The release of Call of Duty: Black Ops II will not only augment the franchise’s popularity, but will also fill the coffers of the company during the holiday season.

Apart from Call of Duty: Black Ops II, Activision has a strong product pipeline for the upcoming holiday season, which is expected to drive the top line in the near term. Activision expects its recently-launched titles namely 007 Legends, Skylanders Giants, Cabela’s Dangerous Hunts 2013, Cabela’s Hunting Expeditions and Transformers Prime to drive its holiday sales. Moreover, games such as Wipeout 3 and Family Guy: Back to the Multiverse would be incrementally beneficial for the company’s top-line growth.

As for the overall video game industry, Activision’s Call of Duty: Black Ops II, Microsoft’s (MSFT) Halo 4 and Ubisoft’s Assassin's Creed III are expected to lend support to the dwindling sales of the video game industry.

Halo 4, which was released in early November, had recorded first day sales of $220 million. Moreover, Assassin’s Creed III, released in late October, had sold 3.5 million copies of the game in the first week of its release. Therefore, the video game industry sales during the holiday season and the coming months largely depend on these games.

While Activision Blizzard will benefit from its attractive products, the continued softness in the video game industry coupled with the sluggish macroeconomic conditions and Activision’s limited presence in the mobile and social gaming segment remain headwinds going forward.

Thus, we have a Zacks #3 Rank for Activision Blizzard, which implies a short term Hold rating.


 
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