Can Activision Blizzard play on new releases, subscription growth in Q4?

Activision Blizzard (NASDAQ: ATVI) brought cheer to fans last year with a slew of new game launches and updates, after forecasting a marked increase in net bookings for the fourth quarter. The video game publisher is expected to report an 8% drop in fourth-quarter earnings to $1.19 per share on revenues of $2.67 billion, which represents a 6% decline. The results will be published on Thursday at 4:05 pm ET.

Among the latest releases, both the regular and mobile versions of Call of Duty: Modern Warfare have been doing well, which is expected to add to revenue growth. Another popular franchise that might have contributed to the top line is Descent of Dragons, which is the latest expansion of Hearthstone, and its free standalone version Battlegrounds.

Related: Activision Q3 2019 Earnings Conference Call Transcript

New Releases

Though the initial response to the World of Warcraft expansion was not encouraging, it gathered momentum towards the end of last year. After registering record subscription growth in the last quarter, the Classic version of World of Warcraft likely maintained the momentum in the December-quarter.

Future Perfect

In the long-term, the key to achieving stable growth is to expand the user-base further by offering more free-to-play games based on popular franchises. The management’s eSports push, with focus on tie-ups, also bodes well for the company.

In the third quarter, revenues declined 15% to $1.28 billion, resulting in a 10% fall in earnings to $0.38 per share. The results, however, exceeded the market’s forecast, triggering a stock rally.

Gaming World

Last week, Electronic Arts (EA) reported double-digit increase in third-quarter earnings and revenues, mainly on the strength of its live services and downloads, which was partially offset by weakness in the mobile segment. However, the results fell short of expectations. Last year, the gaming world witnessed several new players entering the already crowded market, which would definitely be a matter of concern for market-leaders like Activision.

Also see: Factors likely to influence Zynga’s Q4 results

Analysts’ average target price on Activision shares represents an 11% upside from the last closing price. The majority of the market watchers recommend buy, expecting an uptick ahead of the upcoming quarterly report. Activision shares have been gaining steadily since early last year, after slipping to a multi-year low. Meanwhile, it witnessed volatility in 2020, after starting the year on a positive note.

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