EA earnings beat expectations but weak outlook drive shares 12% lower 📉

Shares of Electronic Arts (EA.US) are losing more than 12% today as, despite strong fourth-quarter results, the gaming giant  reported a disappointing outlook for the current quarter due to a six-week delay in the release of the highly anticipated game Star Wars Jedi: Survivor.

Revenues: $1.88 billion, 5.1% y/y growth

Earnings per share: $0.73, 217% increase y/y

The company expects Q1 2023 (excluding deferred sales from online purchases) bookings of $1.68 billion to $1.78 billion. Analysts according to Bloomberg had forecast $2.22 billion. The company's higher revenue and profit results were mainly due to a strong 'EA Sports' portfolio with an emphasis on Fifa games (World Cup 2022), where Fifa Mobile and Fifa Online 4 posted great results. 

FIFA 23 is poised to become the biggest title in the brand's history, having recorded record player engagement in Q3. Player engagement in FIFA Mobile tripled in Q4, with FIFA Online in Asia reaching its highest level of monthly active users in years. In addition, more than 10 million new players joined The Sims, with daily, weekly and monthly active users increasing by double digits year-over-year. Other new games also performed well, including NHL 23 and Need for Speed Unbound.

• EA's game revenue (more than 33% of revenue) rose 1% year-on-year to $622 million. Revenue from game downloads rose 6% y/y, to $400 million. Merchandise revenue fell 8% y/y to $216 million.Gross margin increased 5.1% to 69.8% y/y while operating expenses declined quarter-on-quarter to $1.02 billion.
• Live gaming services and other revenues (nearly 70% of revenues) rose 7.3% y/y to $1.25 billion. By platform, console revenues rose 1% y/y to $1.13 billion. PC revenue rose 16% y/y to $374 million. Revenues from the mobile platform increased 6% y/y to $277 million. GAAP operating income rose 183.3% y/y to $289 million. 
• The company repurchased 2.6 million of its own shares in Q4, for $325 million, bringing its total shareholding to 10.2 million. EA has scheduled another $0.19 dividend for March 22, 2023, the ex-date will be March 1, 2023.

Company forecasts

For Q1 2023, the company expects revenues between $1.7 billion and $1.8 billion and much lower EPS in the range of $0.05 to $0.20 per share. For the full year 2023, EA estimates revenues in the vicinity of $7.25 to $7.35 billion and EPS. Prior to the postponement of Star Wars' release, it projected $7.65 billion to $7.85 billion.

EA Sports (EA.US) shares, D1 interval. The price fell below the SMA200 (red line) indicating possible weakness and a retest of the 61.8 Fibonacci retracement. Source: xStation5