Electronic Arts Inc. shares were trading down on Friday morning after some worrying numbers were revealed in the firm’s earnings report. Some Wall Street analysts weren’t all that worried about the changes that the firm announced, however, and Star Wars: Battlefront is a major silver lining for the firm.
At time of writing shares in Electronic Arts were selling for 73.07, down 3.93 percent from Friday morning’s open. Michael Pachter of Wedbush Securities and Eric Handler of MKM Parners both came out in early defense of the firm in the wake of earnings, but traders don’t seem to be listening.
Electronic Arts disappoints
Electronic Arts earned 45 cents per share on sales of $815M in the three months through September. EA recorded the quarter as its second of fiscal 2016. The firm’s outlook for the full year now sits at a full year profit of $3 per share on sales of $4.50 billion. Guidance for the second third quarter of 2016, the three months through December 2015, was set higher even after the firm announced the delay of a key release.
Mirror’s Edge Catalyst, the follow up tot he firm’s 2007 hit Mirror’s Edge, will now be released in Q1207. Previously the game was supposed to hit shelves in Q42016. Eric Handler was optimistic on the firm’s future, despite the drop in the firm’s stock price on Friday morning.
He said that the firm outperformed on all key metrics during the second quarter. He boosted his price target on the firm from $82 to $84. Michael Pachter of Wedbush followed suit. He kept an Outperform rating on the firm’s shares and raised his price target from $84 to $86. One game will likely decide how the firm’s results from the current quarter pan out.
Star Wars Battlefront will prop up Electronic Arts
Handler wrote that the firm did “increase its Star Wars Battlefront outlook to 13mn units from 9mn-10mn units and given its conservative nature, likely leaves room for additional upside potential.” Star Wars Battlefront is set to hit shelves on November 17, and it’s likely to be one of the biggest hits this holiday season.
13M is a huge number, even for a hit game, and it could make Electronic Arts the most successful game firm of Christmas 2015. The firm has, with its Battlefield series, been trying to get the better of Call of Duty from Activision-Blizzard for the best part of a decade. Star Wars Battlefront may finally be the shooter that puts the firm in control.
The last entry in the Activision-Blizzard series, Call of Duty Advanced Warfare, was a low seller by series standards, but still claimed the title of top seller in 2014.
Even if Star Wars Battlefront does put Electronic Arts on top this year, it’s not clear if the firm will be able to turn the sci-fi shooter into an annual release. It’s games that share core elements that can be released year on year that make the real money in the industry.
Electronic Arts signed a multi-year deal with Walt Disney Co to make games based on Star Wars back in 2013. Battlefront may be the first truly major hit made in the wake of that deal, and with Star Wars movies coming hot and fast over the next five years or so, the firm may be able to capture huge profits off of the back of that lucrative license.