Electronic Arts earnings: Bracing for slower times, relying on live services
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Electronic Arts (NASDAQ:EA) reports after Tuesday's closing bell on the start to its new fiscal year, and like its peers in videogame publishing, EA stock has seen some welcome outperformance of late - and is preparing to get used to a more moderate idea of growth.
That comes after an unprecedented time for videogames with the COVID-19 lockdowns, and the arrival of some tough comparisons in 2022 vs 2021.
The company last quarter wrapped up a record year where it grew bookings by more than 20% - though that came with the benefit of an extended shutdown that boosted a number of "work/play-at-home" stocks.
Electronic Arts has joined other videogame makers in outperforming the market since mid-May; EA is up 17.6% over that span vs. a gain of 3.2% for the S&P 500 (see a chart of that performance here.)
But the June quarter marks some dog days for game sales. Consensus expectations for the seasonally weak first fiscal quarter are for earnings per share of $0.28, on bookings of $1.26B - a 6% decline from the tough comparison of the prior year's Q1. The company offered its own outlook last quarter for Q1 bookings of $1.2B-$1.25B, and net income of $216M-$240M.
When it posts Tuesday afternoon, one metric that bears watching is the progress of live services as the major factor in EA bookings: Live services made up 85% of Q4 net bookings, and for last fiscal year as a whole, it had growth by 17% and made up 71% of the total.
Meanwhile, the company's game slate always draws investor focus, but there may not be much clarity just yet, as the schedule is loaded toward the back half of the fiscal year. Its FIFA franchise (soon to lose that organization's brand association after nearly 30 years) had more than 150M accounts last fiscal year, and its battle-royale shooter Apex Legends set engagement records.
EA will also be on watch now that Sony cut back on its profit outlook due to a decline in PlayStation game sales (some 47.1M game units moved on Sony's PlayStation 4 and 5 platforms in the quarter, down from a year-ago 63.6M).
Seeking Alpha authors rate EA a Buy on average, as do Wall Street analysts. Seeking Alpha's Quant Ratings call EA stock a Hold, however.