MKM Partners On Activision Blizzard: Rolling Out The Big Guns In Q3

Eric Handler of MKM Partners previewed

ahead of the company's third quarter results on Tuesday after market close. "We remain positive towards Activision and continue to believe the company is well positioned to once again exceed quarterly estimates and the Street's full year outlook," Handler wrote in a note to clients on Tuesday. Handler is projecting Activision to earn $0.12 per share in the third quarter on revenue of $1.0 billion. This compares to consensus estimates calling for the company to earn $0.13 per share on $1.005 billion in revenue. When Activision reported its second quarter results on August 5, the company guided its third quarter EPS to be $0.11 on revenue of $975 million. Activision's "Destiny" should account for nearly half of total revenue in the third quarter, according to Handler's estimates. Despite expectations of strong sales, the analyst expects Activision's gross margins to fall to 65.0 percent from 74.3 percent last year, due to higher product and marketing costs associated with the launch of "Destiny." Handler expects Activision to be "flush with cash" at the end of the year with plenty of flexibility to repurchase the remainder of Vivendi's 43.5 million shares, announce a new buyback plan or payback debt. Shares are Buy rated with a $26 price target.