Activision (NASDAQ:ATVI) shares are up after the Motley Fool Stock Advisor pick pounded second-quarter expectations and raised its full-year outlook.

For the second quarter, the video game publisher's revenues rose 164% to $310.6 million. As a result, the company turned last year's second-quarter loss of $10.1 million into a $25.5 million, or $0.17 per share, profit. That beat the analyst estimate for earnings of $0.09 per share on $259.6 million in revenue, as well as the company's own forecast given at last quarter's report (see Activision Gets Heroic Boost).

The key titles in the quarter included the smash hit Spider Man 2 for multiple platforms, as well as Doom 3 and Call of Duty United Offensive for the PC. The highly anticipated Doom 3 is the best-selling PC game of the year so far.

In the earnings release, CEO Robert Kotick attributed the success to the company's recent focus on producing a few key high-quality and highly marketable titles rather than many mediocre ones. Kotick noted that five titles have already reached the million-units-sold mark, with three of them achieving multimillion-unit sales.

The second-quarter success actually led Activision to lower its forecast for the third quarter, as the company suspects that a portion of the sales of its key second-quarter titles simply occurred in the second quarter rather than the third. Also affecting the third-quarter outlook is the shift of Doom 3's release for the Microsoft (NASDAQ:MSFT) Xbox into the fourth quarter. As a result, Activision now expects to earn $0.49 per share on revenue of $500 million, rather than $0.52 on $515 million.

But more importantly, Activision raised its fiscal 2005 outlook. The company now expects to earn $0.75 per share on $1.15 billion in net revenues, up from its previous guidance of $0.69 on $1.10 billion in net revenues.

This is the big time of year for the video game publishers. And as I've said before, it should prove to be a holiday season packed with more of the most highly anticipated games than ever before.

Activision kicked off the holiday season a few weeks ago with the release of Tony Hawk's Underground 2. Yesterday marked the release of Take-Two's (NASDAQ:TTWO) Grand Theft Auto: San Andreas for the Sony (NYSE:SNE) PlayStation 2, a game many expect to top the leaderboard. In a couple of weeks, Microsoft will bring out Halo 2, followed by Sony's release of Gran Turismo 4, and then Electronic Arts' (NASDAQ:ERTS) Need for Speed Underground 2 -- the sequel to last year's best-selling game. And after that, we'll finally see Konami's (NYSE:KNM) long-awaited Metal Gear Solid 3 in early December.

In contrast to last holiday season, when the company had two of the top three sellers (see Super Activision), Activision doesn't figure to play such a large role this year. That aside, the stock is starting to look attractive.

Activision claims trailing free cash flow of $122 million. Backing out the company's $606 million in cash, that leaves the company trading at a reasonable enterprise value of about 10 times trailing free cash flow. Not bad for a company sporting revenue growth and a 42% return on invested capital (ROIC).

Both Activision and Electronic Arts are Motley Fool Stock Advisor recommendations.

Fool contributor Jeff Hwang owns shares of Electronic Arts.