Wedbush Morgan analyst Michael Pachter said that Guitar Hero sales are trailing "significantly" behind last year, down 22 percent in dollars and 32 percent in units.
"Our channel checks indicate that recent increases in Guitar Hero sales and better than expected sales of Call of Duty and [World of Warcraft] Wrath of the Lich King were insufficient to offset the weak initial GH sales," Pachter wrote.
He lowered fiscal Q3 (ending in December) estimates to $2.12 billion in revenue from $2.25 billion, and earnings per share estimates to 30 cents from 33 cents. Activision Blizzard's guidance is for $2.2 billion and EPS of 29 cents.
Pachter also lowered fiscal 2009 estimates to $3.54 billion in revenue from $3.67 billion, and EPS to 47 cents from 50 cents.
The analyst is still confident that Activision is well-managed and stable, rating the firm's stock as a "strong buy."
Analyst Colin Sebastian with Lazard Capital Markets, who recently lowered his estimates on slower Guitar Hero sales, lowered projections again as Activision discounted the price of Call of Duty: World at War from $59 to $49.
"While the move may be part of an annual promotion, we believe a $10 discount on one of the industry’s top holiday releases highlights the risk of lower software pricing moving into the new year," he wrote.
Sebastian lowered his Q4 revenue and EPS estimates to $2.1 billion and 27 cents, respectively, from $2.17 billion and 29 cents.
His revised fiscal 2009 estimates are $5.07 billion and 63 cents, down from $5.2 billion and 67 cents.
Despite the lowered estimates, he maintained his "buy" rating for Activision shares.
"We believe the product road map presented by management, and track record of operational execution, provide solid visibility for growth in 2009," he said.