Activision Blizzard Inc. (ATVI - Snapshot Report) and High Moon Studios recently launched TRANSFORMERS: FALL OF CYBERTRON, the game that depicts the final battle between the AUTOBOTS and DECEPTICONS.
The game’s storyline revolves around the war-engulfed home planet of CYBERTRON. Players can choose their favorite character and use their respective unique skills in the battle to save the planet. Additionally, fans can play the game with or against fellow gamers in the online multiplayer mode. The gamers also have the option of personalizing their characters' appearance and customizing their skills.
The game is available on Microsoft Corp.’s (MSFT - Analyst Report) Xbox 360 and Sony Corp.’s (SNE - Analyst Report) PlayStation3. The PC version of the game is also available. The Entertainment Software Rating Board (ESRB) has proffered a “T” (“Teen”) rating to the game in terms of violence quotient. Metacritic has provided a Metascore of 82 and 78 for the Xbox 360 and PS3 versions, respectively. The positive rating indicates that the game is likely to be popular, generating incremental sales going forward.
Activision delivered strong results in the recently concluded quarter. Profits doubled on a year-over-year basis, with the top line increasing 50.8%. Management expects the launch of TRANSFORMERS: FALL OF CYBERTRON along with some of the content packs of Call of Duty: Modern Warfare 3 to positively impact the upcoming quarter. Moreover, the expected release of Ice Age Continental Drift — Arctic Games, Wipeout 3 and Angry Birds Trilogy will be beneficial for the company’s top line.
However, softness in the video game industry and Activision’s limited presence in the online gaming market coupled with significant competition from Electronic Arts Inc. (EA - Analyst Report) and Take-Two Interactive Software Inc. (TTWO - Snapshot Report) are the headwinds going forward. Moreover, increasing investment related to new product development may hurt profitability in the near term.
We have an Outperform recommendation over the long term (6-12 months). Currently, Activision Blizzard has a Zacks #1 Rank, which implies a ‘Strong Buy’ rating in the short term.