Activision Pipeline Following A Weak 'Call Of Duty' Release

Barclays’ analysts mentioned checks with several retailers and third-party data services indicated that the sales of Activision Blizzard, Inc. ATVI "Call of Duty" have so been lagging expectations.

The analysts maintain an Overweight rating on the company, while lowering the price target from $50 to $44.

Sales Lagging

“We do not think the shortfall in sales to date is attributable to franchise fatigue or other secular threats, but rather a lower quality product from Infinity Ward, the same studio that disappointed gamers with Ghosts in 2013 and again with Infinite Warfare in 2016,” the analysts explained.

The franchise is expected to recover in 2017, with the launch of the next "Sledgehammer" title, with a more pronounced recovery expected in 2018, possibly driven by the next version of "Black Ops."

Estimates Revised

The Q4 revenue estimate for "Call of Duty" has been lowered from a decline of 5 percent year-on-year to a decline of 32 percent year-on-year.

The Q4 EPS estimate has accordingly been lowered from $0.79 to $0.60.

In addition, sales volume is expected to decline in Q4:16, which in turn is expected to negatively impact DLC and MTX revenues in 2017.

The EPS estimate for 2017 has been lowered from $2.35 to $2.07.

“We expect 4Q results and 2017 guidance will likely be the last negative catalyst for ATVI before shares should start to move higher again, as execution improves throughout next year,” the analysts added.