Hype For One Activision Blizzard Franchise Should Excite Investors

On the heels of strong sales of the 2017 release of Call of Duty: WWII, Activision Blizzard (NASDAQ: ATVI) recently announced the next installment of the series will be Call of Duty: Black Ops 4. Its predecessor, Black Ops III (2015), has been so popular that the company continues to support that game with additional content for players to purchase while playing.

It’s possible that Black Ops 4, which will launch on Oct. 12, could surpass its predecessor’s popularity to become the top-selling Call of Duty game in the series’s history. Based on the high interest it’s garnering on social media and the game’s focus on multiplayer gameplay, those weighty expectations may not be out of reach.

Image source: Activision Blizzard.

Black Ops 4 is trending

The Black Ops 4 live stream set new records as the most watched game unveiling in Call of Duty history. It was the top trending topic on Twitter globally during the announcement. In total, views for the live stream, official trailers, and other videos have already exceeded 80 million.

Online views for game trailers, etc., have proven to be a reasonably good indicator of sales. For example, last year’s Call of Duty: WWII received significantly more online views over the previous year’s Infinite Warfare version, which translated to a strong launch in fall 2017.

Call of Duty: WWII was the top-grossing console game worldwide in 2017, which is almost an annual tradition for the franchise. Based on strong sales of WWII, as well as Destiny 2 and Crash Bandicoot N. Sane Trilogy, the Activision publishing segment grew its fourth-quarter revenue 16% year over year.

How past Call of Duty games have fared

The Call of Duty franchise is one of four games that have made up two-thirds of the company’s annual revenue over the past three years. It’s also one of the best-selling video games of all time, but sales of the series haven’t always been consistent.

The 2014 release of Call of Duty: Advanced Warfare didn’t perform well enough to boost the Activision publishing segment, which saw its full-year revenue decline 7% over 2013.Additionally, the 2016 release of Call of Duty: Infinite Warfare performed very poorly, which contributed to an 18% decline in full-year revenue for the segment.

Yet Activision still managed to exceed overall revenue and earnings expectations in those years, mainly because management has a history of under promising and over delivering.

Management’s early guidance for 2018 is calling for 4.8% growth in revenue to $7.355 billion, and growth in non-GAAP earnings per share of 11%. If history is any guide, expect management to gradually increase those estimates as the year goes on, especially with a major World of Warcraft expansion releasing later this summer and Black Ops 4 on track to have a big launch.

There are a few reasons why investors should bet not only on a strong launch for Black Ops 4, but possibly a new franchise record.

Black Ops 4 is being designed for esports

To date, the Black Ops sub-series of the Call of Duty franchise is the most played in company history, with a community of 200 million players who have spent a cumulative 15 billion hours playing the games. That is a large community of fans that is stoked about a new multiplayer feature coming to Black Ops 4.

New multiplayer games like Fortnite and PlayerUnknown’s Battlegrounds are extremely popular right now for their online survival gameplay. Black Ops 4 will feature its own Hunger Games-style mode for the first time, which makes this release in the series the most highly anticipated in company history.This is a turning point for the Call of Duty franchise, which is dropping its single-player story mode due to the massive popularity of online multiplayer competitive gaming, especially in light of the growth of esports.

Similar to how Activision created Overwatch to target the esports market with its focus on team-based multiplayer gameplay, executives seem to be positioning the Call of Duty series as a pure online competitive game for the benefit of growing the audience for Call of Duty World League, the professional esport based on the game.

It’s a new era

Given the popularity of the Call of Duty franchise coupled with a pure focus on offering gamers more multiplayer gameplay — which is all the rage right now — Black Ops 4 could easily be the all-time best-selling game in the series and deliver not only a solid finish to the year, but it could create a multiplayer experience that keeps gamers engaged (and spending money) well beyond 2018.

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John Ballard owns shares of Activision Blizzard. The Motley Fool owns shares of and recommends Activision Blizzard and TWTR. The Motley Fool has a disclosure policy.

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