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Activision Blizzard Shares Slump as Call of Duty: Modern Warfare Battle Pass is Delayed

Nov 12
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The previous few days have proven to be poor for Activision Blizzard (NASDAQ:ATVI) following the release of its quarterly earnings. Despite beating predictions, share prices faltered from $56.78 upon opening on the 7th of November to $52.52 upon the close of the day yesterday, the 11th of November.

Yesterday alone saw shares fall 3.28%, even though the majority of brokerages have the company as a buy rating, with an average target price of $59.81. Recently JPMorgan Chase & Co raised its price objective for the company from $58 to $62, with other changes coming from Macquarie giving a $58 price target, Bank of America with a $62 price target and Piper Jaffray Companies giving a $62 price target, all three set in the second half of October. On the 4th of November, Piper Jaffray analyst Michael Olson stated his belief that Activision Blizzard "has put a lethargic 2019 behind it and can rebound in 2020".

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Why the cause for this recent continued fall in price for Activision Blizzard? Seemingly, this appears to be down to the short term, with the battle pass of the hugely successful Call of Duty: Modern Warfare having been delayed now from a November launch to December. In the earnings call following the release of the quarterly earnings, the company stated this regarding the battle pass:

We will support other key franchise with a stream of content, services, events, and features. This includes our new in-game system for Modern Warfare, which begins in December, slightly later than originally planned.

This slight delay will likely cause a lowering of sales figures, particularly due to the shorter time the pass will be on sale as well as the fact that releasing in December, it has to compete with the holiday season and potentially lower spending from those customers whose funds will go elsewhere. However, I don't personally believe this is the primary cause of the recent fall.

Other factors that have likely contributed to the fall in stock price are factors that weren't as well covered during the earnings. The primary one being user engagement, where the company saw falling user engagement across all three of its brands, Activision, Blizzard and King. The company as a whole saw a fall of 8% when it comes to MAUs (Monthly Active Users).

Activision Blizzard also saw a rapid decline from $83.19 before their Q3 earnings in the 2018 calendar year to $50.94 following their earnings. That period saw a huge backlash from fans and investors following the announcement of Diablo Immortal as well as the failing of Destiny 2 and the lowering number of MAU's during their earnings at the time, the company seeing a YoY fall of 39 million MAUs. This year saw a YoY fall of 29m MAUs.

Much like the brokerages and analysts' beliefs, it's hard to think of Activision Blizzard as a company to not hold onto, if not invest in further. The announcement of Diablo IV and Overwatch 2, two huge games now in the pipeline, as well as the success of Call of Duty: Modern Warfare and Call of Duty mobile, places the company in a strong position for the future. Further to this, the company also revealed that other large titles are in the pipeline, to be announced at a later date.

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