Video game publishers EA and Activision soundly beat earnings estimates Tuesday, but their stocks went in opposite directions on their future guidance.
Activision ended Monday up more than 6 percent after predicting that gamers will continue turning to free-to-play games like its mega popular “Call of Duty: Warzone” due to the financial impact of the coronavirus. EA, on the other hand, saw its shares slide 3.5 percent after expressing uncertainty about the impact that the lack of real-world sports could have on the sales of its marquee franchises like “FIFA” and “Madden NFL.”
“We don’t know — because there’s no precedent on this – what happens long term if any of the sports seasons get delayed any further,” EA CFO Blake Jorgensen said on Tuesday, prompting the plunge. “But we do believe that everything we’re seeing now, particularly in esports, is that we can be a huge factor in helping people socialize and do what they love around the sports they love.”
Video game sales in the United States have surged in the last two months as the virus shut down the country and forced millions inside their homes, with sales in March hitting their highest in over a decade. And Activision and EA’s earnings reports Monday reflected that.
EA posted adjusted earnings of $1.31 per share during, bearing estimates for 97 cents a share, on net bookings of $1.21 billion.
EA’s revenue from live services in the quarter were $832 million, up about 17 percent from a year ago, the company said. Activision posted adjusted earnings per share of 76 cents, blowing away estimates for 38 cents on net bookings of $1.52 billion, compared to a forecast for $1.32 billion.
But EA’s fiscal 2021 forecast fell short of analyst expectations due in part to its concern over live sports, while Activision raised its 2020 adjusted revenue forecast as quarantined gamers flock to its new releases.
Many analysts had expected the extended stay-at-home orders to further boost sales and user engagement for video games across all platforms without accounting for the differences between the companies’ recent releases, explained Wedbush analyst Michael Pachter.
“I think the Street doesn’t get that Activision has new games and EA has none,” Pachter explained. “Activision had great timing launching ‘Call of Duty: Mobile’ in October and ‘Warzone’ in March.”
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