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FIFA Franchise Should Drive Electronic Arts’ Q3 Earnings

Electronic Arts and BioWare world premiere their new game “Anthem” at the Xbox E3 2017 Briefing on Sunday, June 11, 2017 in Los Angeles. (Photo by Matt Sayles/Invision for Microsoft/AP Images)

Electronic Arts (NASDAQ:EA) is set to report its Q3 fiscal 2019 results on February 5. The company has guided for a revenue growth in the high teens while the earnings will likely be $0.62 per share, as compared to a loss of $0.60 per share in the prior year quarter. The growth in the company’s top line can primarily be attributed to the uptick in the Services segment, which is benefiting from its live services offerings. This trend will likely continue in the near term, as the company expands its live services offerings. We have created an interactive dashboard analysis ~ What To Expect From Electronic Arts’ Q3 FY19. You can adjust various drivers to see the impact on the company’s overall earnings, and price estimate.

Expect Revenue To Grow In High Teens

We forecast mid-to-high teens growth for both Products, as well as Services & Others segment. This can primarily be attributed to the company’s FIFA franchise, and the launch of FIFA 19 towards the end of the previous quarter. The Services segment should also benefit from the growth in the FIFA franchise, especially its live services, such as Ultimate Team, which has been a big success for Electronic Arts, allowing the company to earn from matchmaking services. Note that Ultimate Team accounts for 50% of the company’s live services revenues. The company’s management in the previous earnings call stated that FIFA mobile is off to a strong start in China, and this should also aid the segment revenues. The company also launched Battlefield V in November 2018, and it is expected to aid the overall top line growth in Q3 and Q4 for fiscal 2019. However, the game hasn’t seen great response. In fact, it is the first Battlefield game not making it into NPD’s top 10 list of the year. This can partly be attributed to the relatively late launch of the game in the year. It will be interesting to see the commentary from the company’s management on Battlefield V demand.

Overall, we estimate the revenues to be around $1.36 billion in Q3, and earnings to be $0.62 per share. We currently have a $105 price estimate for Electronic Arts, which we will update post the Q3 fiscal 2019 announcement.

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