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Electronic Arts stock heads toward largest drop in more than a decade after earnings miss

Electronic Arts Inc. stock plunged toward its worst decline since the dot-com bubble in after-hours trading Tuesday, after the videogame maker missed holiday-season sales estimates and lowered its forecast.

If EA EA, +4.63%  stock’s roughly 18% decline in the extended session Tuesday carries into regular trading Wednesday, it would contend for the largest single-day percentage decline since Dec. 17, 1999, when shares in the videogame publisher dropped 25.5%, according to FactSet. EA shares declined 17.8% on Oct. 31, 2008, and 16.9% on March 22, 2005, the only times they have declined by 14% or more in this millennium.

In a conference call late Tuesday, EA Chief Executive Andrew Wilson said that the company faced “significant challenges” in the fiscal third quarter that would continue through the fourth quarter.

One of the most prominent issues was the company’s largest release ahead of the holiday season, “Battlefield V,” which EA delayed until November. Videogame critics had mixed reactions to the title, unlike its predecessor, which was critically acclaimed. EA said that “Battlefield V” sold 1 million fewer copies than executives had expected, at 7.3 million units.

“Battlefield V” launched without a so-called battle royale option, a mode that has contributed to the outsize success of “Fortnite.” Wilson said that because EA launched the game closer to the holidays, it often discounted the price to compete with other titles.

“As a result of these decisions, we struggled to gain momentum and did not meet expectations for the quarter,” Wilson said in the conference call. “We made some calculated decisions that did not work as planned in Q3 and we did not execute well in other areas of our business. Against the backdrop of a very competitive quarter, the combination of those factors led to our underperformance.”

The competition Wilson spoke of included Take-Two Interactive Software Inc.’s TTWO, +0.93%  “Red Dead Redemption 2,” Ubisoft Entertainment SA’s UBSFY, +1.71%  “Assassin’s Creed Odyssey” and Activision Blizzard Inc.’s ATVI, +2.27%  “Call of Duty: Black Ops 4.” Take-Two and Activision shares also took a hit in late trading Tuesday, with Activision falling nearly 3% and Take-Two down less than 1%; Take-Two reports earnings Wednesday, and Activision is scheduled to disclose its performance on Feb. 12.

EA reported fiscal third-quarter net income of $262 million, which amounts to 86 cents a share, compared with losses of $186 million, or 60 cents a share, in the year-ago quarter. Adjusted for items such as stock-based compensation, earnings were $2.30 a share. Revenue rose to $1.29 billion from $1.16 billion in the year-earlier quarter, though like many videogame companies it also issues a net bookings figure that accounts for online-enabled games, among other things. EA’s third-quarter net bookings fell to $1.61 billion from $1.97 billion in the year-earlier quarter.

Analysts surveyed by FactSet had estimated on average adjusted earnings of $1.94 a share on sales of $1.75 billion. Wall Street expected net bookings of $1.76 billion.

For the year, EA reduced its guidance and executives said it now expects full-year earnings of $3.20 a share on sales of $4.88 billion. For the fiscal fourth quarter, EA said it now expects earnings of 56 cents a share on sales of $1.16 billion and net bookings of $1.17 billion. Analysts had modeled adjusted earnings of $1.58 a share on sales of $1.48 billion.

Prior to Tuesday’s after-hours losses, EA stock had fallen 24% in the past year, as the S&P 500 index SPX, +0.47%  gained 3.4%.

This post was originally posted at http://www.marketwatch.com/news/story.asp?guid=%7B4344539E-299A-11E9-8A77-01F9ED67D04E%7D&siteid=rss&rss=1. WGEH does not own this content and is not responsible for it.

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