Activision Blizzard (NASDAQ: ATVI) shareholders haven't been doing a whole lot of complaining lately. The stock hit a fresh four-year high on Friday, fueled by the leading video game developer's move to buy back most of the shares owned by majority stakeholder Vivendi.
The move won't come cheap for Activision Blizzard, but it does eliminate the uncertainty of what the French conglomerate would do with its 61% stake in the game maker.
The new high comes just as Activision Blizzard is set to report quarterly results on Thursday. If you think that everything is rosy here, think again.
Let's go over a few reasons to worry as Activision Blizzard steps up to report.
- Analysts see a brutal quarter with revenue falling 43% and earnings falling even harder. Wall Street's forecasting a profit of $0.06 a share, well off the $0.20 a share it earned a year earlier.
- World of Warcraft players continue to defect from the massive multiplayer game. The game peaked in popularity with more than 12 million active accounts three years ago. We're now down to 8 million -- and falling.
- Last year's sleeper hit -- Skylanders: Spyro's Adventures -- will be challenged in a few weeks. Disney's (NYSE:DIS) Disney Infinity takes the same model of physical figures that can enter a virtual world when planted on a base. Skylanders was the industry's hottest seller through the first half of 2012, but now we're seeing Activision Blizzard turn to deep discounts to get young gamers hooked before Disney steps in next month.
- The video game industry has been declining for four years, but diehard gamers feel that November's debut of PS4 and Xbox One will breathe new life into the niche. That may be wishful thinking, and at the very least it will take a couple of years before either platform grows into a substantial base of players.
- Call of Duty: Ghosts also happens to hit the market in November. This is the franchise that has been Activision Blizzard's saving grace as other once-popular lines fall out of favor. It should set new sales records, but it won't be easy. Gamers saving up for new platforms or those concerned about buying too many games for current generation systems may be more hesitant than usual this time.
- Take-Two Interactive's (NASDAQ:TTWO) Grand Theft Auto IV held the sales record before Activision Blizzard's Call of Duty games took the lead. After more than five years, Grand Theft Auto V hits the market in September. If Call of Duty: Ghosts fails to raise the bar for initial unit sales, don't be surprised if the finger gets pointed at Take-Two's magnetic release hitting the market six weeks earlier. Young gamers aren't made of money, you know.
With all of these potentially negative catalysts in play, Activision Blizzard will be challenged to keep its multi-year highs going.
Longtime Fool contributor Rick Munarriz owns shares of Walt Disney. The Motley Fool recommends Activision Blizzard, Take-Two Interactive, and Walt Disney. The Motley Fool owns shares of Activision Blizzard and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.