Why Electronic Arts Shares Have Fallen Today
Actions of Electronic arts (NASDAQ: EA) fell 7.1% on Friday after the video game maker’s forecast raised concern among investors.
EA’s revenue fell 14.6% year-over-year to $ 1.2 billion in the second quarter, mainly due to game launches expected to take place later in the year. year in 2019. Yet several of EA’s major franchises have performed well, including Madden NFL, which has seen its player base grow by almost 30% in the past year.
EA’s cash generation also remained strong. After generating more than $ 2 billion in operating cash flow in the previous 12 months, the gaming giant is increasing its capital returns to reach investors. EA has announced a new $ 2.6 billion share buyback program that will be completed over the next two years. It also launched a quarterly cash dividend of $ 0.17. This puts the stock’s return at 0.6%.
Investors, however, appeared to be focused on EA’s guidance for the third quarter and fiscal 2021. Management estimated third-quarter and full-year revenue of $ 1.675 billion and $ 5.625 billion. billion dollars, respectively. It was well below Wall Street’s expectations of $ 2.35 billion and $ 6 billion.
EA’s lackluster advice was surprising, as most video game companies have seen increasing demand for game downloads and increased player engagement during the pandemic. EA’s disappointing sales forecast has made investors wonder if these trends in customer behavior in the gaming industry will continue.
In turn, some investors see EA’s new dividend as a tacit admission by the company that its days of dizzying growth may soon come to an end.
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