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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Stock of the week - Electronic Arts (02.02.2023)

13:48 2 February 2023

Top game developer sees 2023 in dark shades

First Ubisoft, now Electronic Arts, lowered revenue forecasts for 2023. In the case of EA, this is due to the delay in the release of the game based on the "Star Wars'' franchise, and lower consumer spending on entertainment, including video games. As a result, the company's shares plunged over 9% in pre-market. Pessimistic revenue forecasts for 2023 fit into Microsoft Corp narrative. Last week  Xbox producer presented gloomy forecasts for the gaming industry, boosting concerns that the slowdown of the gaming sector may deepen in 2023.

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After two years of growth driven by the pandemic, the value of the gaming market fell by 4.3% in 2022, according to estimates provided by the analytical firm NewZoo. The relatively low number of large, global premieres is partly responsible for the poor result. This is what both companies and investors are waiting for.

Reschedule of an important premiere date

EA on Tuesday, along with quarterly results, announced that the release of Star Wars Jedi: Survivor would be pushed back by six weeks to April 28, which would fall into its next fiscal year. The game is a sequel to Star Wars Jedi: Fallen Order released in 2019, which attracted over 20 million players. In most cases, information about postponing a major premiere, once announced, is negatively perceived by the market.

Poor quarterly results

Meanwhile, the results showed that recent releases of Electronic Arts games were not interesting enough to attract the attention of consumers. Also during tmes of high inflation, priority is given to necessities over entertainment.

The company on Tuesday reported fiscal third quarter revenue of $2.34 billion, down from $2.58 billion in the same period in 2021, and below analyst expectations of $2.5 billion. .

Negative forecasts for 2023

As a result of the postponement of Star Wars' game release, the company currently expects revenue in the fiscal fourth quarter in the region between $1.675 billion to $1.775 billion, well below analyst estimates of $2.24 billion.

The company, which released Need for Speed Unbound and the latest installment of FIFA series in recent months, now expects annual revenues in the range between $7.07 billion to $7.17 billion. Previously, the forecasts ranged from $7.65 billion to $7.85 billion.

Conclusions

Goldman Sachs, Intel, Ubisoft and Electronic Arts. More and more companies are making it clear that they expect revenue to fall in 2023 due to the looming recession. Even major game developers, who were about to experience a renaissance after the Covid 2020 boom, do not see 2023 in bright colors. This may lead to the correction of the last bullish wave and create interesting opportunities to acquire  securities of companies whose shares are (still) relatively cheap.

Electronic Arts (EA.US) shares fall more than 9% in premarket trading, creating a bearish price gap. In the short term, it is possible that buyers will make an attempt to close the gap given the strong consolidation zone around $140.0.Source: xStation5

This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

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