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EA Shares Hit Following First-Quarter Results

Even though Electronic Arts' first quarter performance was better than analysts expected, the Madden and The Sims 3 publisher's share price has taken a 7 percent hit since its results announcement Tuesday.
Even though Electronic Arts' first quarter performance was better than analysts expected, the Madden and The Sims 3 publisher's share price has taken a hit following its results announcement Tuesday. As of market open today, EA's shares stand at $20.40 per, with a fall of close to 7 percent occurring across yesterday's trading. Earlier this week, EA's results report for the quarter (which ended June 30) showed losses of $234 million, compared with $95 million for the same period last year. The publisher lost significantly less per share than the 13 cents analysts had forecasted, though -- excluding restructuring and other items, the company ended up losing just two cents. Its net revenue of $644 million was less than last year's $804 million quarter, but also "better than expected," as CEO John Riccitiello said. "We believe that investors largely anticipated a bottom-line beat," suggested Cowen Group analyst Doug Creutz in a note to investors. "We continue to think EA has missed the current hardware cycle and is unlikely to achieve meaningful earnings growth until the next one." Wedbush Morgan analyst Michael Pachter said investors might be concerned about recent sales of NCAA Football 10 sales tracking weaker than expected -- "we are not," he says. In fact, Wedbush Morgan is maintaining its "outperform" rating for EA shares, and in general finds the conservativism of the publisher's industry guidance to be wise: "The company made a mistake last year by being overly aggressive with its guidance, and we do not expect it to make the same mistake this year," says Pachter. He notes that the company still has a strong balance sheet, with $2.3 billion in cash and investments on hand and no debt at the end of June, providing the company a "more than adequate" cushion.

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