Activision Blow-Out: Citi Forecasts FY08 Encore

Activision (ATVI) had a “defining” FY08 following the spectacular success of franchise titles “Guitar Hero” and “Call of Duty,” says Citi. Revenue grew at three times the industry rate and ATVI expanded operating margins by 1,190 bps. In the fourth quarter, a period in which ATVI didn’t release a single new title, revenue exceeded guidance by a remarkable 71%. Non-GAAP EPS in FQ4 came in at $0.17, 325% above guidance, and management guided FY09 revenue and pro forma EPS to $3.1 billion and $1.30 respectively. These are stellar numbers, and Citi is forecasting more of the same:

FY09 momentum driven by a solid FY09 game pipeline, strong industry backdrop (Citi est.’s global software growth +18% y/y in 2008), the potential for deeper European penetration of its publishing business (improved regional direct sales and presence at retail, and a FY09 lineup with more Intl appeal – localised Guitar Hero, Bond), and the estimated 1H CY08 completion of its proposed merger with Vivendi Games. We see non-GAAP EPS of $1.44 in CY09 for the combined entity vs. initial guidance of $1.20

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