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Wedbush: Activision To Marginally Beat Expectations
by Jason Dobson [PC, Console/PC]
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July 31, 2006
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Market analyst firm Wedbush Morgan Securities has predicted that California-based publisher and developer Activision will beat market expectations with its first quarter 2007 earnings, if only slightly. Activision is expected to release its earnings for the period on Thursday, August 3.
The firm cited Activision's relatively strong U.S. software sales of late, including titles such as Call Of Duty 2, as the reason for the expected increase, with revenues for the company anticipated to beat Wedbush's previous estimate of $145 million, a number that echoes Activision's previously released guidance. In fact, recent NPD sales data found that Activision's sales actually remained more or less constant from the prior year, though the firm originally claimed that sales were expected to be down 40 percent.
While this discrepancy would seem to highlight an expected substantial increase in reported revenue as compared to Activision's guidance, Wedbush notes that the company saw revenues last year of $60 million that resulted from a European co-publishing agreement for Star Wars Battlefront II. As such, the firm does not believe that the upside to Activision's first quarter reported earnings will be overly substantial.
Wedbush has maintained its target price of $18 for shares of Activision, along with its label of "strong buy," though it notes that uncertainty, such as that associated with game release timing, effects of competition, and slower than expected demand for console hardware, remains a risk. The stock opened its trading today at $12.20.
The analyst believes that Activision will continue to report a cautious outlook and guidance, currently for fiscal 2007 revenues of $1.025 billion. Additionally, due to the recent delay of Enemy Territory: Quake Wars from the second to the fourth quarter, Wedbush believes that Activision will stay its current course and reiterate its moderate fiscal 2007 guidance.
However, the firm does note that revenue resulting from the acquisition of RedOctane, the publisher of the popular Guitar Hero franchise, could offset any revenue shortage resulting from the delay of Quake Wars over the remainder of the year.
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