Shares of Electronic Arts (EA) could see a boost Wednesday after the company reported a smaller than expected loss for the first fiscal quarter. Shares are down over 48% in the calendar year and could use the boost in a rally. Shares traded up about 3% in after hours trading Tuesday night.
Electronic Arts saw first quarter revenue of $491 million, versus last year's $524 million in the same quarter. Net income came in at a loss of $181 million. The company reported a loss of $0.41 in the first quarter. Analysts had been expecting a loss of $0.42 on $500.08 million. Electronic Arts first quarter earnings beat marks a string of recent success in earnings per share beats. In the previous four quarters, Electronic Arts beat earnings per share estimates by 6.3%, 6.5%, 225.0%, and 5.1%.
Digital revenue continues to be a strong point for the company. Digital revenue is expected to be $1.6 billion in fiscal 2013. Last year, Electronic Arts saw $1.2 billion recognized from digital revenue. Electronic Arts has the mission to "Become the leading pure-play digital entertainment company." Digital revenue by platform for the quarter:
· PC: $146 million, +62%
· Console: $99 million, +65%
· Smartphone/Tablet: $52 million, +86%
· Feature Phones/Other: $27 million, -13%
Electronic Arts continues to be a leader across several gaming platforms:
· #1 PC Retail
· #1 HD Console
· #2 PC Download
· #1 Mobile, Apple & Reader
· #1 Casual Service
· #3 Social
· #2 Paying Subscription MMO
Other noteworthy news from Electronic Arts recently includes:
· Higher gross margins, 62% vs. 55%
· Battlefield 3 Premium hits 1.3 million subscribers, earns $37 million that will be recognized in the company's fourth quarter
· Launch of SimCity Social on Facebook, averaging 10 million monthly active users
· EA Origin hits 21 million users, including 9 million on mobile devices
The next fiscal quarter will see the release of several high profile sports games including:
· Madden 2013
· FIFA 2013
· NCAA Football 2013
· NHL 2013
The sports franchise continues to be a strong point for Electronic Arts. I wrote a recent article showcasing how EA's acquisition of the UFC gaming rights would further the company's dominance across several major sports. The FIFA brand is shaping up to be one of EA's strongest worldwide. Digital revenue from FIFA 12 has hit $144 million, versus $79 million from the previous year's soccer game. EA also signed a deal with Nexon to bring FIFA Online 3 to Korea later this year. FIFA Online 2 and FIFA World Class Soccer brought in $25 million in revenue from Asia alone in the company's first quarter.
Electronic Arts also announced a new $500 million share buyback program. At prices under $12, the company could retire 41.7 million shares of its stock. Electronic Arts could retire around 13% of current outstanding shares over the next year.
Electronic Arts is guiding for full year earnings per share of $1.05-$1.20. Analysts see the company earning $1.06 for the fiscal year. This number sets up nicely for Electronic Arts, as it falls in the low range of guidance. Analysts see Electronic Arts earning $4.27 billion in revenue. The company has estimates of $4.1-$4.3 billion in revenue.
Shares of Electronic Arts have been stalled for over a year. The company's shift to digital and social gaming is supposed to increase revenue and make shares more excited. Investors have not caught on to the changes yet. I think the turnaround plan is in the process of something big for EA. Shares are undervalued at these levels.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.