Activision Blizzard's (ATVI) business is changing in focusing more on digital distribution and the ways of making money off that. No longer are investors worried just about how many copies of Skylanders or Call of Duty it sold, but new areas such as mobile advertising, eSports and digital distribution will get much of the focus.
"ATVI's strong brand and well-recognized game franchises will allow the company to foster deeper engagement with players and reduce its earnings volatility between product cycles," Oppenheimer analyst Andrew Uerkwitz wrote in a note to clients. "Also, we believe there is significant upside from its emerging eSports, media content and mobile advertising initiatives, the benefit of which will not be material until after 2017."
Activision's continued push into mobile and thereby being less reliant on disc sales, has been fueled by its acquisition of King Digital, maker of the popular Candy Crush series of games. "If done successfully, the shift to a digital distribution model could have the potential to significantly reduce costs compared to traditional non-digital methods," said PureFunds CEO Andrew Chanin via email, highlighting a reduction in costs in things like shipping or packaging.
When the Bobby Kotick-led Activision reports on November 3, investors will also be looking to hear how its Overwatch Summer Games event went and what it means for the future.
Jefferies analyst Brian Fitzgerald wrote that he was "particularly optimistic" around the event, noting it "appeared to drive meaningfully higher levels of engagement and spending across the user base." Fitzgerald has a buy rating and a $55 price target on Activision.