Electronic Arts Inc (EA) closed the Thursday trading down -0.38% at $119.32 shares. The stocks have shown an increase of 10.99 percent since start of the year, but are down 15.03 percent over the last quarter. After the company released its quarterly report and forecasts, shares fell sharply last week.
The drop in Electronic Arts shares on November 9 was triggered by news of imminent access to Pfizer and BioNTech vaccines, giving hope to overcome the pandemic and its associated restrictions in offline entertainment (cinemas, entertainment centers).
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A reassessment of the first impression of the quarter’s performance and appreciation of the company’s growth prospects may be demonstrated by the return of Electronic Arts shares to growth over the past two days.
Total revenue of $1.15 billion from Electronic Arts for the second quarter (ended September 30). That indicates a decline of 14.6 percent compared to $1.35 billion of total revenue in the same quarter of 2019. Looking at segment revenue, however, online gaming revenue has grown from $768 million to $869 million, which suggests that when choosing to subscribe to video games, consumers are changing their preferences. Industry analysts consider the subscription business model to be superior, since it creates a reliable revenue stream independent of the release of a new, more or less popular video game.
Sales figures for the last 12 months of the Live Services segment indicate an improvement which rose to $3.9 billion from that of $3.36 billion last year. It is also positive that, due to the growing popularity of such franchises as FIFA and Madden, the share of revenue in this segment has grown to about 75.5 percent of total revenue. Recent data showed a 30 percent increase in the number of players in Madden and NFL 21, while in the FIFA 20 game, the number of players on consoles and PCs is close to 35 million. The EA Play subscription-based mobile service has passed the 6.5 million paid subscriber milestone.
A record cash flow of $2.04 billion resulted from the company’s move to an online subscription model in the last twelve months. For the first time in history, EA has announced a $2.6 billion share repurchase program for two years and initiated a dividend payment.
The company will begin paying a $0.17 per share quarterly dividend, which is about a 0.5 percent return at the current share price.
Electronic Arts has not changed its projections for fiscal year 2021 (ending in March), reiterating that it expects $5.63 billion in revenue and per share earnings of $3.15.
The third quarter revenue forecast (end of December 31, 2020) was $1.675 billion, with earnings per share forecast at $0.61.
Analysts, however, rated these predictions as weak, expecting $6 billion in annual revenue, some lowering their forecasts for the target price of shares in Electronic Arts Inc (EA).