Shares of Electronic Arts fell about 7% in Thursday’s extended trading session after the video game company provided a weaker-than-expected revenue outlook for 3Q and fiscal 2021.
The company’s 3Q revenue forecast of $1.675 billion came in significantly lower than consensus estimates of $2.35 billion. Its fiscal 2021 sales projection of approximately $5.625 billion also fell short of Street estimates of $6 billion.
Meanwhile, Electronic Arts (EA) reported a significant year-over-year decline in its 2Q top and bottom-line. The company’s 2Q revenue plunged 14.6% to $1.51 billion, while earnings declined 78.2% to $0.63 per share. Moreover, its net bookings fell 30.7% to $910 million.
However, both its revenues and earnings came ahead of the Street’s estimates of $955.6 million and $0.02 per share. The company’s CFO Blake Jorgensen said, “We delivered a quarter well above our guidance, driven by our live services, particularly Madden and FIFA. This resulted in a new record trailing twelve-month cash flow of $2.04 billion.” (See EA stock analysis on TipRanks).
Furthermore, Electronic Arts’ board of directors approved a new two-year share repurchase program worth $2.6 billion. Additionally, management also initiated the company’s first-ever quarterly dividend and declared a cash dividend of $0.17, which translates to an annualized dividend yield of 0.5% at Thursday’s closing price of $128.33.
Last month, J.P. Morgan analyst Alexia Quadrani raised the stock’s price target to $155 (20.8% upside potential) from $150 and reiterated a Buy rating. In an October 26 research note to investors, Quadrani said that video game companies would continue to benefit from increased engagement and spending amid the COVID-19 pandemic.
Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 9 Buys and 5 Holds. Given the year-to-date share rally of 19.4%, the average price target of $153.73 implies a further upside potential of about 19.8% to current levels.
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