'Call Of Duty' Sales Disappoint According To Retailers

"Call of Duty " is a first-person shooter video game franchise owned by Activision. The most recent iteration, named "Infinite Warfare," was released on November 4, 2016.

Low Product Quality From Studio Hits Sales

Analyst Christopher Merwin, however, is not too concerned, as he thinks the sales miss to date is not due to franchise fatigue or secular threats but due to lower quality of product from Infinity Ward, the same studio that disappointed gamers with "Ghosts" in 2013 and is also behind the recent iteration.

Recovery Likely In 2018

Barclays believes the franchise will recover in 2018, with Treyarch's next version of "Black Ops." The firm is of the view that the stock will likely re-rate to $45 or better, especially ahead of 2018, which is expected to be a better year for the company as it would include "Black Ops," "Diablo 4," King ads and eSports.

Lowering Q4 Estimates

Barclays lowered its fourth-quarter revenue estimate for "Call of Duty" to -32 percent year-over-year from -5 percent year-over-year, assuming 22 percent ASP increase and a 47 percent decline in units. Accordingly, the firm's earnings per share estimate for the quarter is lowered to $0.60 from $0.79.

Activision Offers Compelling Risk Reward

Barclays believes the last negative catalyst for the company's shares would be the fourth-quarter results and the 2017 guidance. Subsequently, the firm sees the shares moving higher, as execution improves throughout the next year. With potential upside 2 times the downside, the firm believes Activision shares offer a compelling risk/reward balance.

As such, the firm maintained its Overweight rating but it lowered its price target for the shares of Activision to $44 from $50.