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Actionable news in ATVI: Activision Blizzard, Inc,

Activision Earnings Preview

ATVI's quarter was driven by COD Black Ops III and Hearthstone expansion packs as well as a successful Overwatch launch.

Estimates are aggressive, but look beatable given Overwatch's huge early success.

We remain cautious on the stock's valuation and near all-time high share price.

We are cautiously optimistic on the prospects of an earnings trade with ATVI.

Activision (NASDAQ:ATVI) reports Q2 earnings Thursday, 8/3, after the close. We are tethered by the valuation and the idea of buying into a stock near all-time highs, but we also feel the stock will report a good quarter that will top Street estimates. Additionally, the stock has a strong history of popping on good earnings. We are cautiously optimistic that shares will head a few percentage points higher in trading Friday, 8/5, and believe there is a favorable risk-reward profile for a trade heading into the ER.

The quarter was primarily driven by three things:

Call of Duty had lots of positive momentum in Q1 and likely carried that over to Q2 with the release of a second map pack for Black Ops III. Exiting Q1, management announced that more people were playing Black Ops III than any other game in the company's history. Roughly 85% of PS4 buyers in North America during Q1 opted for the Black Ops III bundle, and this contributed to the game setting records for follow-on digital content sales and Season Pass attach rates. The second Black Ops III expansion pack was first launched for PS4, and then...