Piper Jaffray Considers Electronic Arts' 2017 Pipeline More Attractive Than 2016's Pipeline

Piper Jaffray maintains its Overweight rating on Electronic Arts Inc. EA, saying that the FY17 pipeline appears more attractive than FY16's pipeline.

"[T]he combination of Battlefield 1, Mass Effect, and Titanfall 2 likely to contribute >25M units. Each title also has strong potential to drive digital revenue growth through full-game downloads and subscription/DLC," analyst Michael Olson wrote in a note.

The next catalysts for EA are the launch of annual sports franchises, including "Madden NFL" (August 23) and "FIFA" (September 27).

The video game developer reported June quarter results ahead of consensus by $0.09. Digital grew 7 percent year-over-year (vs. Street estimate for a 3 percent decline). EA maintained FY2017 guidance for revenue of $4.9 billion, but raised EPS to $3.55 (from $3.50), compared to consensus at $3.58 on $4.94 billion.

Related Link: Michael Pachter On Electronic Arts Earnings, "Mirror's Edge" And Poor Guidance

"We believe guidance will prove to be conservative due to a strong lineup of titles for 2H'FY17 which are also likely to benefit from the faster-than-expected uptake of next-gen consoles (now >60M units)," Olson highlighted.

However, the September quarter EPS guidance was below the Street ($0.40 versus Street at $0.59), while revenue was essentially in line ($1.08 billion versus $1.1 billion), due in part to release timing of "FIFA" 17.

The title will launch on September 27, leaving only four days in the September quarter compared to 11 days in the prior year. As such, Olson expects the timing shift to move about $75 million in high-margin digital revenue (FGDL and Ultimate Team) into the December quarter.

Olson raised the price target by $1 to $88, while the shares were up 1.64 percent at $78.04.

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