Activision Blizzard may have another huge esports business on its hands.
Jefferies reiterated its buy rating for Activision Blizzard shares, predicting its "Call of Duty" battle royale mode will become a big success.
On Monday the game publisher rolled out the beta test of its "Blackout" battle royale game mode in its upcoming "Call of Duty" game release.
"Early results look encouraging," analyst Timothy O'Shea said in a note to clients Tuesday. "Blackout mode looks like it could drive user engagement and Twitch viewership. If so, this would be a key foundation upon which ATVI could build a true eSports business akin to what it has already done with Overwatch League."
Battle royale is a style of game popularized in the last year by Epic Games' "Fortnite" and "PlayerUnknown's Battlegrounds." The game type has up to 100 online players who violently battle to the death until only one player survives.
O'Shea reaffirmed his $90 price target for Activision Blizzard shares, representing 13 percent upside to Tuesday's closing price.
The analyst said Activision Blizzard has sold 20 "Overwatch League" teams, which will generate a cumulative $400 million to $500 million of sales over the next six to seven years. He estimates the league will make $300 million of revenue for the company next year, including broadcast rights, sponsorships, ticket sales and merchandise.
"The Call of Duty franchise could follow a similar blueprint," he said. "We see clear upside to 2018 EPS driven by numerous catalysts" for Activision Blizzard.
"Call of Duty: Black Ops 4" is slated for release on Oct. 12.