EA down in pre-market following Ubisoft’s guidance cut
EA down in pre-market following Ubisoft’s guidance cut
EA
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TTWO
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By Michael Elkins
Shares of Electronic Arts Inc (NASDAQ:EA) are down 0.17% in pre-market trading on Thursday after Ubisoft (EPA:UBIP) surprised with reports that the company would lower guidance by at least €430 million (€1 = $1.075), on an implied back half guide of €1.64B. The cut was driven by underperformance of two small franchises, the postponement of Skull & Bones, and to a lesser extent a softer back catalog on casual mobile games.
Ubisoft emphasized its plans to narrow focus on only its strongest franchises, thereby helping them become truly global brands. CEO Yves Guillemot believes that as consumer spending on games suffers due to economic stress and inflation, mega brands such as Call of Duty, FIFA, and NBA 2K, take a higher share of spending leaving less for new launches and obscure titles.
Bank of America analysts wrote in a note, “We believe Ubisoft’s commentary validates our Buy ratings on EA and TTWO, each of which own two “mega brands.” In our September 20th Recession Playbook we highlighted the change in consumption behavior referred to by Ubisoft’s CEO, and we forecast high-single growth for EA in FY24 (driven by a 70% FIFA & Live Services concentration), and 48% growth in TTWO’s PC/Console revenues (driven by several launches from franchises and studio leaders with long-standing reputations as well as steady performance from NBA 2K and GTA Online). Most investors we polled shortly after Ubisoft’s announcement were not concerned about a negative read through for EA and TTWO, and considered the situation idiosyncratic to Ubisoft.”
