Activision Blizzard (NASDAQ:ATVI) isn’t heading into the release of its third-quarter numbers on a particularly high note. ATVI stock is down nearly 20% from its early October peak, with a lackluster launch of the newest entry into its Call of Duty franchise getting the selling started, and anger over the announcement of the mobile version of Diablo responsible for the most recent weakness.

Perhaps it’s an opportunity to step into a new position in Activision stock cheaply? Maybe. But, it’s not as if ATVI stock was overbought then or severely undervalued now. If the ATVI earnings report is going to spark a recovery, the company’s going to have to convince investors its recent letdowns don’t reflect the company’s foreseeable future.

Rival’s Success May Not Mean Much

Unlike most other industries, a strong showing from a peer/rival doesn’t inherently mean Activision Blizzard did just as well. Moreover, gamers are a fickle bunch, making it particularly tough to handicap video-game stocks.

That’s why investors need to take the recent quarterly report from Electronic Arts (NASDAQ:EA) with a grain of salt. Operating income of 98 cents per share on sales of $1.22 billion trounced estimates for a profit of 58 cents per share and a top line of $1.18 billion. But, EA also introduced four new sports games to fuel the quarter. It would have been a surprising disappointment if the company hadn’t topped estimates.

Could it be a clue that the love of video games is accelerating altogether? It’s possible.

Players are sometimes forced to choose the purchase of one game or another. Interest in EA’s sports titles may have been embellished specifically because Activision wasn’t offering anything gamers wanted in a big way. Activision Blizzard didn’t have any major game launches in the third quarter — Call of Duty: Black Ops 4 wasn’t released until October.

Still, Activision’s Overwatch franchise and previous Call of Duty titles remain more than marketable, particularly in light of the fact that the company is turning up the heat on its professional Overwatch league. The company doesn’t have too much to lean on in the way of excuses.

In other words, assume nothing about Thursday’s news after the closing bell rings, and prepare for all contingencies.

Activision Earnings Preview

For Q3, analysts expect Activision Blizzard to report earnings of 50 cents per share on sales of $1.66 billion. Both would be down on a year-over-year basis, compared to $1.9 billion that was turned into a profit of 60 cents per share of ATVI stock. With its Q2 report, the company projected a Q3 operating profit of 37 cents per share on sales of $1.49 billion.

Activision hasn’t failed to beat a quarterly profit estimate in over three years.

There’s a big ‘but’ that has to be noted, however.

During Q3 last year, Activision Blizzard launched the well-received Destiny 2, which by the time the quarter was over had become the best-selling console game of the year. And, the number of regular online players of Activision’s Call of Duty game reached another record, bolstered by the growing, broad popularity of battle-royale games at the time. In the meantime, ATVI’s Overwatch and Hearthstone battle games helped grow the size of Blizzard’s online player community to a record-breaking 42 million monthly users.

That red-hot growth has been a tough act to follow. Though the company’s headcount of monthly active users was still respectable in the second quarter of this year, the term ‘record breaking’ was conspicuously missing from the report’s rhetoric. Rekindled audience growth may end up being just as important, if not more important, to investors after Thursday’s close than the company’s fiscal results.

Looking Ahead for ATVI Stock

Equally important to the perceived value of ATVI stock, and the market’s likely pricing of it on Friday, is the company’s guidance.

As of the end of Q2, Activision Blizzard was modeling full-year sales of $7.35 billion, translating into operating income of $2.46 per share of Activision stock. Analysts are calling for a top line of $7.48 billion and income of $2.64 per share. The company tends to underestimate its results, perhaps ensuring some sort of earnings beat.

Just like user engagement metrics, any revision to its current guidance could mean more to investors than Q3’s financial data. The good news is, the stock’s recent weakness suggests expectations are relatively low.

Game publisher Take-Two Interactive (NASDAQ:TTWO) will report its quarterly numbers after Wednesday’s close, further rounding out the bigger-picture look at the gaming industry’s current state.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.