Analysts lower EA, Activision projections

Lowered expectations for big-time publishers, but long-term outlook remains favorable.


It's been a rough holiday season for gaming so far, with sales in September, October, and November failing to live up to numbers posted in 2004. And while Piper Jaffray analysts Anthony Gikas and Stephanie Wissink have twice reduced their annual revenue estimates over the past few months for the game industry as a whole, until today, they hadn't revised projections on specific stocks to match.

The two lowered their projected earnings numbers for Electronic Arts and Activision in both the short and long term today, but said both companies remained attractive in long-term investments.

They reduced their Electronic Arts sales projections for the December quarter from $1.52 billion to $1.45 billion, and likewise lowered the associated earnings per-share estimate from $1.29 to $1.20. In the long term, the company reduced its peak earnings per-share estimate from $3.50 to $3.20 in fiscal year 2010.

Activision's long-term earnings per-share projection of $1.05 for FY10 beats out EA's proportionate to stock price, but the near-term numbers are still expected to slip. For the December quarter, Gikas and Wissink downgraded their sales expectations for the company from $820 million to $780 million, with earnings per share down from $0.55 to $0.50.

If they miss their previous marks this holiday season, Activision and EA will likely have company. While Piper Jaffray previously pegged an 8 percent growth rate for the industry, the firm is now expecting revenues to be up a more modest 3 percent. Gikas and Wissink blamed the poor sales in part on the transition between console generations.

"In our opinion, more consumers are waiting for next-generation systems than previously thought and gamers view industry-wide hardware and software products as overpriced," they wrote. They also pointed out that EA "has been early to address this concern," though it's unclear to what exactly the pair is referring.

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