By Dan Gallagher Activision Blizzard Inc. (ATVI) shares rose Friday after reporting third-quarter results and maintaining its fourth-quarter forecast, encouraging investors who had grown worried about holiday game sales. The shares recently rose 37 cents, or 3.5%, to $11.24 although the stock had slumped 16% over the previous month. It remains up 25% for the year. Shares of another game publisher, Electronic Arts Inc. (ERTS), advanced 77 cents, or 4.3%, to $18.93. EA reports its results after the closing bell Monday. Shares of smaller publisher THQ Inc. (THQI) rose nearly 1% to $5.18 while retailer GameStop Corp. (GME) picked up 1.7% to $24.58. Overall, stocks in the videogame group have dropped over the past month as investors have become more concerned about the industry's ability to ring up strong sales for the holiday shopping season after a sharp slump earlier in the year. "Investors remain skeptical about the continued health of the video-game industry, and Activision's recent share-price weakness reflects that skepticism," wrote Michael Pachter of Wedbush Morgan in a note to clients Friday. Activision is considered to hold the strongest position in the group. Next week, the company will release "Call of Duty: Modern Warfare 2," which is widely expected to be the top-selling game title of the year. Other big titles like "DJ Hero" and "Tony Hawk: Ride" are also expected to ring up strong numbers. But declining sales of the company's mega-popular "Guitar Hero" franchise have made some worry that the music genre has peaked. Still, the company said its latest release, "Guitar Hero 5," was a big seller in the third quarter, which helped the company report better-than-expected sales for the period. Activision gave a conservative forecast for the current quarter, pointing out that the retail sales environment is still risky. But analysts widely believe the company's games will remain a popular draw for holiday shoppers. "For a company about to ship what is most likely going to be a gigantic hit, Activision shares do not appear to have priced success in, with the stock down roughly 15% in the past two weeks," wrote Doug Creutz of Cowen & Co. Creutz said he expects the company to sell 7 million units of "Modern Warfare 2" by the end of the year. Most analysts remain bullish on Activision for next year, when its Blizzard unit is expected to release a new "World of Warcraft" title as well as a sequel to the "Starcraft" franchise. Both personal computer titles offer high margins and a subscription-based revenue model. "With two major high-margin PC titles confirmed for next year--'Starcraft II: Wings of Liberty' and 'World of Warcraft: Cataclysm'--and a strong slate of titles from the Activision side of the business, we continue to believe that consensus estimates for 2010 are far too low," wrote Heath Terry of FBR Capital Markets. Sentiment on Activision remains positive, with all but one analyst rating the stock a buy. Price targets range from $11 to $18, with the median at $15. -Dan Gallagher; 415-439-6400; AskNewswires@dowjones.com
