Analysts Agree: Activision Has Clear Upside

Activision Blizzard, Inc. ATVI is scheduled to report its second-quarter results after Tuesday's market close. The Estimize community (based on 30 estimates) is expecting the company to earn $0.11 per share on revenue of $675.84 million. The Wall Street's consensus estimate is less optimistic, calling for the company to earn $0.09 per share on revenue of $666.02 million.

Brean Capital: Activision's Big Bets Usually Pay Off

Todd Mitchell of Brean Capital estimated in a note in late July that Activision will earn $0.08 per share in the second quarter on revenue of $660 million. The analyst added that key drivers for the quarter will be strong sell through for "Call of Duty," which he estimates sold 1.1 million copies in the quarter. At the same time, "Hearthstone" revenue is expected to show a 70 percent jump to $68 million.

Mitchell added that potential upside for the quarter could come from "Diablo III China" and "Heroes of the Storm."

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The analyst also commented that Activision makes "big bets" that "usually" pay off. With that said, the company have four big bets for the year, which also creates four points of uncertainty. Specifically: 1) "Call of Duty: Black Ops III" generating upside in a tough environment, 2) scaling "Destiny" where monthly active users have fallen to two million, 3) offsetting increasing competitive pressures on "Skylanders" with the launch of "Guitar Hero," and 4) successfully launching and scaling multiple FTP tittles.

However, Mitchell also noted that Activision's own guidance and the Street's estimates continue to "overly discount" Call of Duty and Blizzard's upcoming F2P titles, which are positive catalysts over the short term as the scaling of these titles become "apparent."

Shares were maintained at Buy with a price target raised to $30 from a previous $28.

Piper Jaffray: Bullish Despite NPD Decline

Michael Olson of Piper Jaffray commented in a note in late July that Activision is expected to report in-line results, despite a June quarter NPD sales decline of 19 percent year-over-year.

Olson said that digital revenue for both "Destiny" and "Call of Duty: Advanced Warfare" are not accounted by NPD. As such, he remains "comfortable" in estimating Activision segment revenue to have risen 7 percent in the quarter while Blizzard's revenue is expected to be down 7 percent.

Shares were maintained at Overweight with an unchanged $27 price target.