Activision Blizzard’s Call Of Duty, Subscriber Trends The Highlights Of Earnings

Activision Blizzard (NASDAQ:ATVI) is scheduled to announce its Q1 fiscal 2012 results on May 9th. ^[1] While there weren’t any significant new game releases by the company in Q1, we believe Wednesday’s earnings release will be centered around Call of Duty: Modern Warfare 3 and associated downloadable content (DLC) sales. Additionally, the earnings release should also give better insights into Call of Duty: Elite and World of Warcraft (WoW) total subs. Activision Blizzard competes with other game developers like Electronic Arts (NASDAQ:EA), Take-Two Interactive Software (NASDAQ:TTWO) and casual gaming mainstays such as  Zynga (NASDAQ:ZNGA). EA reported results Monday that disappointed the market’s expectations.

See our full analysis for Activision Blizzard here

Wednesday’s earnings should center around Call of Duty: Modern Warfare 3

We expect Call of Duty: Modern Warfare 3 to be the major growth driver in the Q1 earnings release. MW3, the first person shooting game released on November 8th last year was a massive success in the holidays 2011 with the game achieving $1 billion in sales in just 16 days after its release. The game carried forward its successful streak in this quarter too as, Call of Duty MW3 remained the highest selling game in both January and February. Additionally, the associated MW3 DLC sales, which were released in January 2012, have also witnessed strong sales.

While we expect a slight decline in Activision’s Q1 revenues due to negative trends in retail video-gaming sales for the most part of 2012, an increase in digital revenues, which carry higher margins, should compensate the net profits in Q1.

A close eye on Activision’s subscription numbers

In addition to MW3, Q1 earnings will also give better insights into Call of Duty: Elite and World of Warcraft total subscription numbers. Call of Duty: Elite, which was launched along with MW3 in November 2011, is the multi-player subscription service for Activision’s Call of Duty console gamers. The initial response on the service have been quite promising, with COD Elite garnering 1.5 million subs by the end of January 2012. We expect the number to increase further gaining from Call of Duty: MW3 DLC releases.

On the other hand, Activision Blizzard’s World of Warcraft has been on a decline since the beginning of 2011. While we expect the decline to continue this quarter too, we expect the declining rate to improve a bit, supported by Activision’s linking of World of  Warcraft (WoW) with Diablo III, by providing free Diablo III copies to WoW’s annual pass users.

We maintain a $19.92 price estimate for Activision Blizzard, which is roughly 60% above its current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Activision to release Q1 fiscal 12 results on May 9th, Source: Activision Blizzard [↩]