Godfather delay whacks EA stock
[UPDATE] Share price takes a hit on news that Mafia game won't come until '06; expect a lively earnings call later this month.
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When the biggest publisher takes one of the biggest games of the year and pumps its planned release schedule full of lead, it can expect to hear about it from analysts and investors. Today, the Street spoke. At press time, Electronic Arts shares were trading at $57.99--up from a midday low of $56.98--which represents a $2.33 dip from Thursday's closing price of $60.32.
In a memo sent to analysts today, P.J. McNealy of American Technology Research predicted the news of The Godfather's delay--made after the markets closed yesterday--would impact company stock adversely. "We believe that this news will be viewed negatively because ERTS is moving arguably its biggest marquee new game (as far as properties go) out of the key December quarter," McNealy said.
The long-term impact on how analysts view the stock? McNealy wrote that as a result of the delay, "we believe it is likely that ERTS will shift revenue and earnings out of its December quarter and into the March quarter with the June quarterly results, but likely retain its fiscal year targets by pulling one or two games into the March quarter from FY06." McNealy stays pat with his "Hold" rating on EA stock.
Forbes is reporting that Banc of America Securities is maintaining its "Buy" rating (and $70 price target) but has lowered fiscal 2006 earnings estimates due to the delay. Banc of America Securities is predicting EA's two biggest rivals will exploit the Godfather delay. Take-Two Interactive's The Warriors and Activision's True Crime: New York City and GUN were cited as the games that will benefit most from the film adaptation's delay.
Mike Wallace of UBS maintains his December quarter estimates of $1.82 billion in revenues, up 28 percent over the same quarter last year, and an earnings per share estimate of $1.70. In his weekly recap memo to investors, Wallace said it was "too early to quantify the impact of this delay on our FY06E EPS."
EA said today it would announce its June quarter results on July 26, a call that's likely to draw a more inquisitive crowd than usual.
[UPDATE] At the closing bell, Electronic Arts closed down $2.87 to $57.46, a 4.74 pecent decline for the day.