Brean And Wedbush Both Think EA's Guidance Is Conservative: Here's Why

In a couple of reports published Thursday, analysts at Brean Capital and Wedbush shared their impressions, highlights and observations from the third day of the 2015 E3 Expo.

Both firms look into Electronic Arts Inc. EA and qualify the management’s guidance as conservative, especially for "Star Wars: Battlefront" unit sales.

Given the “almost universal high praise” following the game’s first public demo, Brean Capital analysts Todd Mitchell and Giancarlo Chaux see upside to the sales estimate (9 to 10 million units) implied in EA’s fiscal 2016 guidance. In fact, the company said this projection did not take into account any of the positive feedback.

Other factors that could drive upside to guidance are better-than-expected FX trends; modest growth in "FIFA 16," "Madden" and "NBA Live 16"; and the launch of the new "Star Wars" mobile card game, scheduled for some time in fiscal 2016.

Guidance Conservative?

Wedbush analyst Michael Pachter and his team also think guidance for sales of "Star Wars: Battlefront" in fiscal 2016 is quite conservative. On Wednesday, EA said “the range may be conservative due to significant marketing support from its partner,” Walt Disney Co DIS.

“In terms of the long-term financial model, EA expects 100 basis points of gross margin improvement each year with leverage on G&A and marketing spending. It believes marketing can be trimmed to 12% of sales, and expects to cut G&A by consolidating offices,” the experts added.

Wedbush maintained an Outperform rating and $31 price target on shares of EA.

Brean Capital rates the stock a Buy and has a price target of $28.