Electronic Arts, Inc. (NASDAQ: EA) plans to release Titan Fall slightly earlier than expected, but Sims 4 will be pushed out to fall of 2014. The changes to the release schedule should alleviate risk to fiscal 2014 guidance.
Electronic Arts, or EA, is a global leader in digital interactive entertainment. The company's game franchises are offered as both packaged goods products and online services delivered through Internet-connected consoles, personal computers, mobile phones and tablets. EA has more than 300 million registered players and operates in 75 countries.
Headquartered in Redwood City, California, EA is recognized for blockbuster franchises such as The Sims, Madden NFL, FIFA Soccer, Need for Speed, Battlefield, and Mass Effect.
The company announced that Titan Fall, the debut game from videogame developer Respawn Entertainment, will be landing on store shelves beginning March 11, 2014 exclusively for Xbox One, the all-in-one games and entertainment system from Microsoft, Xbox 360 games and entertainment system and PC.
Titan Fall was previously expected to be released sometime in the June quarter of 2014. The new date for Titan Fall is March 11th in the U.S. and March 13th in Europe. Titan Fall is one of the most anticipated titles currently and has been generating strong buzz for some time.
"We believe this (change in schedule) is being done to take advantage of the open window created by Ubisoft delaying the release of its highly anticipated title Watch Dogs," Sterne Agee analyst Arvind Bhatia said in a client note.
EA expects the net effect of the changes to its release schedule to be neutral. Although, these changes reduce guidance risk that investors were beginning to factor in due to the slower-than-expected start to FIFA 14.
With EA's recently released key title FIFA 14 starting off slower than expected, investors were beginning to factor in some risk to fiscal 2014 earnings. The changes in the release schedule announced would reduce that p! otential risk.
In July, EA guided fiscal 2014 GAAP net revenue of approximately $3.50 billion. Non-GAAP net revenue is expected to be about $4.00 billion. GAAP loss per share is expected to be approximately 98 cents while non-GAAP diluted earnings per share is expected to be approximately $1.20. Wall Street expects earnings of $1.23 a share on revenue of $4.01 billion, according to analysts polled by Thomson Reuters.
"We think EA remains well positioned for the upcoming console cycle and can grow EPS at a 20% CAGR in the foreseeable future. This should be driven by mid single-digit top-line growth combined with 150 bps to 200 bps of operating margin expansion annually for the next several years," Bhatia noted.
With next-generation consoles from Microsoft and Sony as key catalysts, EA is well positioned for a period of sustained growth with an impressive slate of core titles, strong digital growth and focused on cost control. This, in turn, would ultimately lead to a return in top-line growth and continued margin expansion for profitable growth.
EA shares trade at approximately 17 times its consensus 2014 EPS estimate. There are approximately 17.3 million shares short on EA, reflecting 6 percent of its diluted shares outstanding, flat from 17.1 million a year ago and a peak of 27.2 million at the end of January 2013.
"At current valuations and a robust portfolio of content, we believe Electronic Arts is an attractive investment opportunity," BMO Capital Markets analyst Edward Williams wrote in a client note.
Short interest in EA has remained flat over the past three months even with a significant rise in share price as investor confidence in the company's growth prospects solidified with the start of a new console cycle and the company's margin expansion story. Shares of EA have climbed about 98 percent in the last year and traded between $11.80 and $28.13 during the past 52-weeks.
EA is set to release its financial results for the second quarter fiscal year 2014! after th! e close of market on Tuesday, Oct. 29, 2013. The street expects earnings of 12 cents a share on revenue of $979.06 million.
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