A leading developer, publisher and distributor of interactive entertainment and leisure products, Activision Blizzard Inc. (ATVI) announced the release of NASCAR The Game 2011.
The game is currently available on Microsoft Corp.’s (MSFT) Xbox 360 video game and entertainment system and Sony Corp.’s (SNE) PlayStation 3 computer entertainment system and is priced at $59.99 MSRP (Manufacturer’s Suggested Retail Price). The game will be available on Nintendo’s Wii system later this spring for $49.99 MSRP.
Developed by Eutechnyx and published by Activsion’s publishing division, the game promises thrill and spectacle of NASCAR with a complete field of 43 cars and drivers, 23 authentic tracks, full damage modeling, realistic wrecks, pit stops and truly authentic details from pre-race flyovers to victory spins.
Players can choose to play as themselves or as one of the sport’s real-world drivers such as Dale Earnhardt Jr., Denny Hamlin, Joey Logano, Mark Martin, Danica Patrick, Tony Stewart and 2011 Daytona 500 champion Trevor Bayne as they battle it out for the NASCAR Sprint Cup Series Championship. NASCAR 2011 has been customized for players of every skill level.
The game also includes in-depth multiplayer modes, which allow up to 16 players . In both online and offline races, players earn NASCAR experience points that help unlock rewards such as decal packs or special car designs, as well as career sponsorships and special races throughout career mode.
We believe NASCAR will boost Activision’s customer base, thereby driving top-line growth in 2011.
Activision was the #1 publisher overall in North America and Europe for fiscal 2010. During the fourth quarter, strong performance from Activision Publishing’s Call of Duty: Black Ops and Blizzard Entertainment’s World of Warcraft: Cataclysm attracted more gamers, which contributed significantly to revenue growth.
Activision reported strong operating performance in the fourth quarter of 2010, with earnings of 52 cents per share beating earnings guidance of 47 cents per share as well as the Zacks Consensus Estimate of 49 cents.
Revenue increased 2.1% in the quarter, on the back of strong growth from the PC (up 2.0% year over year) and MMORPG games (up 69.0% year over year) segments. However, Activision provided a conservative outlook given the continued uncertainty related to the macroeconomic and retail environment.
For the first quarter of 2011, Activision forecasts non-GAAP net revenues of $640 million and earnings of 7 cents per share. In the said quarter, the company plans to release only Call of Duty: Black Ops – First Strike, the first add-on content pack.
The outlook does not include any new game from Blizzard in 2011. Revenues are expected to be down year over year due to the negative foreign exchange impact and the exit of low-margin business. Management expects no new music or skateboarding games and anticipates distribution and affiliate businesses to decline in 2011. In case the company does not release a major title this year, management plans to launch two Blizzard titles in 2012.
Recommendation
Activision plans to reduce its exposure to low-margin and low-potential businesses, helping it to grow over the long term and enable it to continue expanding its position as the largest digital publisher. Moreover, management expects growth from high-margin Digital business going forward.
However, a sluggish top-line, lack of major new titles and stiff competition from Electronic Arts Inc. (ERTS) and Take-Two Interactive Software Inc. (TTWO) are the primary headwinds for the stock at this point.
We have a Neutral rating on Activision over the long term (6-12 months). Currently, Activision has a Zacks #4 Rank, which implies a short-term Sell rating.
ACTIVISION BLZD (ATVI): Free Stock Analysis Report
ELECTR ARTS INC (ERTS): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
SONY CORP ADR (SNE): Free Stock Analysis Report
TAKE-TWO INTER (TTWO): Free Stock Analysis Report
Zacks Investment Research
