What To Expect From Activision Blizzard’s Q3

by Trefis Team
Activision Blizzard
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Activision Blizzard (NASDAQ:ATVI) is set to report its Q3 2018 earnings on November 8, and we expect the company to post a mid-high single digit decline in the top line, primarily due to a tough comparison with the prior year quarter, which benefited from Destiny 2, and Black Ops III Zombies Chronicles. However, the company should see some benefits from the August release of World of Warcraft: Battle of Azeroth. Note that we forecast revenues to grow for the full year, and Q4 to be a solid quarter for Activision Blizzard benefiting from the release of Call of Duty: Black Ops 4. We have created an interactive dashboard ~ What Is The Outlook For Activision Blizzard ~ on the company’s expected performance in 2018. You can adjust the revenue and margin drivers to see the impact on the company’s overall earnings, and price estimate. We currently forecast the full year earnings to be $2.62 per share, and we have a $80 price estimate for Activision Blizzard.

Expect Activision And Blizzard To See High Single Digit Revenue Growth In 2018

While we expect Q3 to revenues to trend lower, we forecast the Activision segment revenues to grow in high single digits for the full year 2018. This can be attributed to the October release of Call of Duty: Black Ops 4. The game garnered $500 million in worldwide sales in first three days of its launch. Blizzard segment should also benefit from the release of World of Warcraft: Battle of Azeroth. The latest expansion sold over 3 million units in the first week of its launch. While this will aid the segment revenues in Q3, the benefits will likely spill to Q4 as well. Note that Activision Blizzard sales fluctuate quarter to quarter depending on the titles being released, and the important trend to watch for is the user engagement. The company’s MAUs (monthly active users) across its segments have fallen since Q4 2017. While the company stated that the total players and hours played were up y-o-y for Call of Duty: Black Ops 4 during the launch weekend, it will be interesting to see if the user engagement remains strong in the subsequent weeks.

King Digital Will Likely See Revenue Decline In The Near Term

Looking at the King segment, we forecast the revenues to see modest decline for the full year, primarily due to the trends seen in MAUs, which declined from 290 million in Q4 2017 to 270 million in Q2 2018. It is not just the recent quarters, King’s MAUs have been on a decline since the past few years. However, the company has managed to grow its revenues, primarily from offering in-game purchases, and advertising. We expect this trend to continue in the near term, and the growth in average revenue per active user for King to offset most of the revenue declines arising from lower MAUs.


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