Activision Levels Up With New Games: Earnings Preview

NEW YORK ( TheStreet) -- Activision Blizzard ( ATVI) is taking steps to shore up its World of Warcraft franchise as it's done with Call of Duty, leading to strong fourth-quarter earnings released after the stock-market close today.

Sterne Agee analyst Arvind Bhatia shows some concern as Electronic Arts ( EA) launched Star Wars: The Old Republic in late December. Bhatia believes that may cause a drop in subscribers Activision's massively multi-player online game (MMOG) World of Warcraft.

Bhatia does suggest that the decline in subscribers may be stabilizing, as the company has taken measures by offering free copies of Diablo 3 with a one-year subscription renewal, and 20 free levels to everyone.

"Our view is that while WoW will feel an initial impact from Star Wars, there is potential for both titles to do well. We believe WoW levels at the end of 4Q could have dropped below 10M," Bhatia wrote in a recent research report. He rates shares "buy" with a $17 price target.

Wedbush analyst Michae Pachter notes that Activision continues to trade at a low multiple because of high revenue concentration among Call of Duty and World of Warcraft. "In our view, Elite and Skylanders this year, as well as multiple Blizzard releases and a Bungie game next year should allay some of those concerns," Pachter wrote in research report. He rates shares "outperform" with a $19 price target.

The video-game publisher is expected to report after the close of stock market trading today. Estimates call for revenue of $2.2 billion and earnings of 56 cents per share, according to analysts polled by Thomson Reuters.

Activision shares are off 0.65% in early Thursday trading to $12.47.

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-- Written by Chris Ciaccia in New York

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