Why EA Is Facing One of Its Worst Trading Days Ever

Electronic Arts Inc. (NASDAQ: EA) reported its fiscal third-quarter financial results after the markets closed on Tuesday. It’s worth pointing out that this is one of the largest single-day drops that this stock has seen (at least in premarket trade) in this millennium.

The video game firm posted $2.30 in earnings per share (EPS) and $1.29 billion in revenue, which compared with consensus estimates that called for $1.94 in EPS and $1.75 billion in revenue. The same period of last year had reportedly $2.18 in EPS and $1.16 billion in revenue.

Digital net bookings for the trailing 12 months was $3.577 billion, up 6% year over year, and represents 74% of total net bookings. For the third quarter, net bookings dropped to $1.61 billion from $1.97 billion a year ago. Analysts were expecting net bookings of $1.76 billion for the quarter.

Looking ahead to the fiscal fourth quarter, EA expects to see EPS of roughly $0.56 and net revenue around $1.163 billion. Net bookings are expected to be about $1.17 billion. Consensus estimates call for $1.59 in EPS and $1.48 billion in revenue for the quarter.

EA repurchased 3.2 million shares for $292 million during the quarter and 9.0 million shares for $1.039 billion during the trailing 12 months.

CEO Andrew Wilson commented:

The video game industry continues to grow through a year of intense competition and transformational change. Q3 was a difficult quarter for Electronic Arts and we did not perform to our expectations. We are now applying the strengths of our company to sharpen our execution and focus on delivering great new games and long-term live services for our players. We’re very excited about Apex Legends, the upcoming launch of Anthem, and a deep line-up of new experiences that we’ll bring to our global communities next fiscal year.

Shares of EA closed Tuesday at $92.52, in a 52-week range of $73.91 to $151.26. The consensus analyst price target is $116.52. Following the announcement, the stock was down over 15% at $78.17 in early trading indications Wednesday.