Analysts assess Activision results

Quartet of industry watchers tells investors that publisher could very well outpace its own guidance for record sales this year.


Yesterday evening, Activision announced its year-end results, delivering $1.51 billion in revenue and projecting a jump to $1.8 billion for its current fiscal year. However, it also posted a larger-than-expected loss for its fourth quarter of the fiscal year. While the market reacted negatively--Activision shares closed down $.92 to $18.87 this afternoon--analysts were largely bullish about the publisher.

Specifically, Pacific Crest Securities' Evan Wilson, Wedbush Morgan Securities' Michael Pachter, Lazard Capital Markets' Colin Sebastian, and Nollenberger Capital Partners' Todd Greenwald all distributed notes to investors advising that Activision could easily outperform its $1.8 billion projection.

Wilson specifically mentioned the Guitar Hero franchise as a reason to be optimistic, saying that franchise alone could provide $200 million in growth for the company. He explained his optimism by pointing to the wider array of games in the series hitting shelves this year, as well as its higher-than-average selling point and resistance to price cuts.

Pachter noted Activision's history of conservative forecasts (it originally projected $1 billion in revenue for last year instead of the $1.51 billion it reported yesterday) and said the publisher has a much stronger lineup of titles this year. For the current fiscal year, Pachter suggests that Activision could exceed its estimates by as much as $200 million, pushing revenue to the $2 billion point.

"The only major titles released last year that will not appear in this year's lineup are X-Men and Marvel Ultimate Alliance," Pachter wrote. "Instead, this year, the company has Spider-Man 3, Shrek the Third, Transformers and a 'new Marvel game' in its lineup."

Pachter's praise wasn't unqualified, however. His understanding is that Activision's next Call of Duty game is set partly in Iraq, an idea that worries him given the "widespread dissatisfaction with the US war effort in that country." Pachter also expressed concerns that the mixed reviews for Spider-Man 3 and competition in the music genre from the Harmonix-developed, Electronic Arts-marketed Rock Band could temper sales.

In his note, Greenwald also brought up the issue of EA competition, not for Activision's latest cash cow, but for one of its longest-running ones. He said that Tony Hawk should see competition for the first time in several years this holiday season when EA releases SKATE for next-generation systems.

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