Why EA shares are down 7% after the bookings update

Electronic Arts (EA) reported a 7% drop in shares after the company lowered its full-year bookings guidance due to underperforming games, particularly its soccer franchise, EA Sports FC, in extended trading.

For the fiscal third quarter ending December 31, EA expects to report approximately $2.215 billion in net bookings, a decrease from its previous guidance of $2.4 billion to $2.55 billion. The company projected revenues for the December quarter at about $1.88 billion, with diluted earnings per share anticipated at $1.11.

The full fiscal year bookings expectation, ending March 31, has been revised to a range of $7 billion to $7.15 billion, down from previous guidance of $7.5 billion to $7.8 billion. EA noted that net bookings encompass both physical game sales and revenue from online games.

This guidance revision highlights a downturn in EA’s prominent soccer video game franchise, which has operated under the FIFA brand since 1993, but has been sold as EA Sports FC since the contract with FIFA ended in 2022. The company also disclosed that the role-playing game “Dragon Age: The Veilguard” had 1.5 million players during the quarter, which fell nearly 50% short of expectations.

EA CEO Andrew Wilson stated, “During Q3, we continued to deliver high-quality games and experiences across our portfolio. However, Dragon Age and EA SPORTS FC 25 underperformed our net bookings expectations.”

Despite seeing two years of double-digit growth in net bookings for its Global Football franchise, EA indicated a slowdown in sales during the December quarter. The company anticipates a year-over-year decline in Global Football sales and a mid-single-digit percentage decline in bookings from online sales, or live services, for fiscal 2025. The soccer franchise was cited as the primary contributor to the live services shortfall.

EA recently refreshed FC 25 with new content and gameplay improvements, along with an annual “Team of the Year” update, which received positive feedback from players.

The company is scheduled to provide a more comprehensive report of its results on February 4.

Okay, so EA just took a hit after lowering their yearly forecast, and it’s got investors sweating. Here’s the breakdown:

The bad news:

• Their big soccer game, EA Sports FC, isn’t selling as well as they hoped. This is a major blow, considering it’s one of their flagship franchises.
• “Dragon Age: The Veilguard” also flopped, with player numbers falling way short of expectations.
• They’ve had to slash their full-year earnings forecast, which never inspires confidence.

The not-so-bad news:

• They’re still expecting decent revenue and earnings for the December quarter.
• They’ve just released a big update for FC 25, which might boost sales.

Honestly, it’s a tricky situation. EA is a solid company with a strong track record, but this news definitely raises some red flags.

• Sell? If you’re risk-averse, it might be tempting to cut your losses and run. But keep in mind that EA could bounce back, especially if their FC 25 update gains traction.
• Buy? This could be a buying opportunity if you believe in EA’s long-term prospects. The stock price is down, which means you can get in at a discount.
• Hold? This might be the safest option for now. Wait and see how things play out over the next few months. Pay close attention to their full earnings report in February.

Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.

Featured image credit: EA