EA Will Continue To Guide Low And Beat Through 2018

Electronic Arts Inc. EA reported Q3 revenue ahead of expectations, driven "Battlefield" and "FIFA." The company may continue with its trend of issuing conservative guidance, while FY2018 would likely be another strong year, Wedbush’s Michael Pachter said in a report.

Pachter maintained an Outperform rating on the company, with a price target of $95.

Q3 Performance Backed By Sports Titles

Electronic Arts reported Q3 revenue at $2.07 billion, versus the Wedbush estimate of $2.1 billion and the consensus expectation of $2.052 billion. EPS came in at $2.48, higher than the Wedbush estimate of $2.35 and consensus expectation of $2.30. The company raised its FY2017 EPS guidance to $3.80.

Electronic Arts’ sports titles “continue to generate surprising revenue growth,” Pachter wrote. “It appears that overall Ultimate Team revenues will grow by over 20% to nearly $800 million this year, with ratable growth from Madden NFL and NHL.”

Upside Surprise Could Continue In FY18

The analyst expressed optimism regarding the company’s positive momentum continuing in FY2018. He added that Electronic Arts may “continue its pattern of conservative guidance and regular earnings upside.”

Pachter expects management to guide to revenue of around $5.2 billion and EPS of $4.20. He mentioned, however, that the company should be able to generate $200-$300 million of revenue upside and $0.30-$0.50 of EPS upside.

“Foreign currency translation could impact the upside by as much as $150 million and $0.25 or so, leading us to maintain our $5.4 billion and $4.40 estimates for FY:18,” the analyst further stated.