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Activision Blizzard (ATVI) Launches WoWs Second Expansion

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Activision Blizzard (ATVI - Free Report) recently announced the release of World of Warcraft: Wrath of the Lich King. Players who already have a subscription to World of Warcraft (WoW) can now avail of it at zero cost.

This second edition of WoW is an iconic adventure from the history of Azeroth that takes players through lush locales, battling foes and completing numerous quests before confronting the iconic Lich King in Icecrown Citadel.

This expansion of Wrath of the Lich King carefully balances both the nostalgia for veteran players and the modernization needed for first-time players. This has brought excitement among players, which can fuel the user base for Activision.

Activision Blizzard to Expand its Gaming Portfolio

Apart from WoW, Activision gains massive traction from its Call of Duty as well. It recently revealed the future of its franchises, which is expected to boost its top line.

Call of Duty: Modern Warfare II, which is a sequel to Modern Warfare 2019 and Call of Duty: Warzone 2.0, which brings in new features like extraction mode, gulag changes and new swimming/aquatic combat, are set to release on Oct 28 and Nov 16, respectively.

Activision is also set to launch Call of Duty: Warzone Mobile in 2023, which is a free-to-play battle royale mobile game with up to 120 players, allowing them to share social features like friends and chat channels.

This portfolio expansion of Activision is further enhanced by the fourth installment in the Diablo series as Diablo IV is also lined up for 2023. The title will support cross-play and cross-progression across platforms and will also engage live service and provide ongoing storytelling.
 

Activision’s strong portfolio makes it an attractive investment. The company is set to be acquired by Microsoft (MSFT - Free Report) for $95 per share in an all-cash transaction.

Activision shares are up 11.7% year to date against the Zacks Consumer Discretionary Sector which fell by 39.8% in the same time frame.

However, the acquisition is facing an in-depth probe in the United Kingdom as Competition and Markets Authority believes that this acquisition could hurt competition in gaming consoles, subscription services and cloud gaming if Microsoft refuses to give competitors access to Activision's best-selling games.

Headwinds

Activision’s dependence on a handful of its franchises, namely Call of Duty, World of Warcraft, Overwatch and King Digital’s Candy Crush, which make up more than 82% of its revenues, poses a risk.

Activision expects costs to shoot up in the near term as the company is trying to deliver franchises faster than expected to aid top-line results.

This Zacks Rank #3 (Hold) company is facing stiff competition from Electronic Arts (EA - Free Report) and Take-Two Interactive (TTWO - Free Report) .

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Electronic Arts’ shares fell by 12.9% year to date. Its upcoming Madden NFL 23 and the most expansive FIFA game are going to strengthen EA’s portfolio. The company expects net bookings for second-quarter fiscal 2023 to be $1.725-$1.775 billion.

Take-Two Interactive’s share declined 38.3% year to date. Its top line gains strong revenues from GTA and Red Dead Redemption, and also from the acquisition of Zynga, which makes TTWO one of the largest publishers of mobile games. The company expects fiscal 2023 revenues to jump 73.3% year over year.

 

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