Electronic Arts (EA) drops over 10% on slashed forecast, Star Wars delay; analyst sees limited downside

Shares of Electronic Arts (NYSE: EA) are down more than 10.5% in pre-open Wednesday trading after the video game giant lowered its full-year forecast.

Electronic Arts announced an FQ3 EPS of $0.73 on revenue of $2.34 billion, which compares to the analyst expectations for EPS of $0.50 on revenue of $2.48B. Q4 net bookings dropped to $2.34B from $2.58B a year ago with EA highlighting the weaker macro environment as a drag on demand during the quarter.

“While our teams delivered for our players, the current macro environment impacted Q3 results,” said Andrew Wilson, CEO of Electronic Arts.

For this quarter, EA sees adjusted EPS in a range of $1.20 to $1.40 on revenue of between $1.70B and $1.80B, significantly below estimates of $2.22 and $2.24B, respectively. Net bookings are seen between $1.68B and $1.78B, again below the $2.22B consensus.

Given the weak FQ4 forecast, the company slashed its full-year forecast so it now expects adjusted EPS at $6 (up or down $0.10), a material cut to the prior guidance for EPS of $6.95-7.25. Analysts were expecting an FY EPS of $7.16.

The full-year net bookings forecast is lowered to a range of $7.07-7.17B from $7.65-7.85B.

Moreover, the company pushed out the “Star Wars Jedi: Survivor” game launch to April 28 from March 17.

KeyBanc analyst Tyler Parker said EA delivered disappointing results, although the analyst believes the downside is limited from here. Parker reiterated an Overweight rating and lowered the price target to $138 from the prior $155.

“The stock should reset here, but we think F4Q estimates are appropriately reset and FY24 guideposts of MSD growth present limited downside risk,” the analyst wrote.

Goldman Sachs analyst Eric Sheridan is less positive on EA stock as he sees lingering questions about the macro and mobile environment. The analyst cut the price target to $118 from the prior $131.

“While EA continued to perform well in its core sports franchises (FIFA a bright spot off the World Cup) and in broader user/player growth/engagement, it is likely that debates about the macro impacts on broader industry trends and continued questions/debates about mobile gaming forward trends will likely dominate the short-term investor debates, especially when paired with mgmt’s preliminary FY24 net bookings guide of a mid-single-digits YoY increase, which landed well below our prior expectations (off of a lower FY23 base),” Sheridan said.

By Senad Karaahmetovic

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