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Activision (ATVI) Rides on Franchise Strength, New COD Launch

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Activision Blizzard (ATVI - Free Report) is benefiting from strong popularity of franchises like Call of Duty (COD), which is expected to boost in-games spending, thereby driving net bookings and top-line growth in the near term.

Recently, the company revealed that the Call of Duty franchise's net bookings have surpassed $3 billion over the past year. Markedly, the COD franchise has enjoyed an 80% year-over-year rise in net bookings so far in 2020, and a 40% increase in total units sold. Moreover, more than 200 million people have played a title in the series so far this year, a new all-time record.

Additionally, the company plans to shift to a shared ecosystem business model for the franchise titles, indicating the integration of Modern Warfare and Black Ops Cold War into Warzone.

Call of Duty: Black Ops Cold War, the most recent game in the franchise, released last month. Placed amid a global rivalry, players are involved in combat and espionage missions in-game against the Soviet Union and its allies.

New game releases over the past year, including battle royale Warzone, mobile hit Call of Duty: Mobile, and Call of Duty: Black Ops Cold War that feature exciting content and new technology have been aiding the stock to perform well boosted by coronavirus-led social distancing norms. Shares of Activision have returned 36.1%, outperforming the industry’s rally of 24.6% in the year-to-date period.

Year to Date Performance

Call of Duty: Key Growth Driver

Activision popularity is primarily driven by its well-known franchises, which will continue to fuel top-line growth. Call of Duty is one of the biggest growth drivers for the company. Notably, the game has been the top-selling console franchise for Activision in 10 of the last 11 years.

The success of World of Warcraft Classic also indicates an expanding portfolio, which will benefit the company’s top line in the long haul.

Additionally, Call of Duty: Modern Warfare has sold more units than Call of Duty: Black Ops 4. Activision stated that it will make frequent content updates to Call of Duty and expand the franchise’s presence across platforms and geographies.

Markedly, Call of Duty: Warzone was launched on Mar 10, 2020 and the update has attracted more than 85 million players to date.

Moreover, developed in collaboration with Tencent’s (TCEHY - Free Report) Timi Studios, Call of Duty Mobile continues to play an important part in driving user base. Since its launch in October 2019, the title has been the highest grossing new game in app stores in the United States and has generated over $480 million in player spending during its first year, per Sensor Tower data.

The game is now in final large-scale testing in China, where over 50 million players have pre-registered to date. Call of Duty: Mobile’s 13th season is expected to begin on Dec 12.

Franchise Strength to Fend Off Competition

Activision is stepping up investments in other popular franchises as well. The company expects to deploy more resources in its franchises, including Overwatch, King’s Candy Crush, Diablo and Hearthstone.

Moreover, the success of World of Warcraft Classic also indicates an expanding portfolio, which will benefit this Zacks Rank #2 (Buy) company’s top line in the long haul. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, Activision faces stiff competition from the likes of Take Two Interactive Software (TTWO - Free Report) , Nintendo and Electronic Arts (EA - Free Report) apart from Tencent and Epic Games.

Notably, Take Two’s Red Dead Redemption 2 and Borderlands 3 gained significant popularity. Moreover, Nintendo’s Animal Crossing: New Horizons gained substantial popularity within a short span of time.

Meanwhile, the latest release of Star Wars: Squadrons is expected to be a solid addition to EA’s strong portfolio of IPs, which include FIFA, Madden NFL, Need for Speed and Apex Legends. Notably, the company’s Star Wars Jedi: Fallen Order was a huge success both critically and commercially.

Nevertheless, Activision’s strong portfolio of games is expected to boost its monthly active user base in the near term.

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