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Game investors wait to see if EA shortfall spreads
A profit warning from video game maker Electronic Arts shook the entire sector in March, but analysts expect the shadow to pass this week as EA and rivals THQ and Activision present quarterly results.
A profit warning from video game maker Electronic Arts shook the entire sector in March, but analysts expect the shadow to pass this week as EA and rivals THQ and Activision present quarterly results.
"I'm looking for kind of in-line quarters, maybe a little bit of upside from some of the publishers," said ThinkEquity analyst Mark Argento. "I don't anticipate anybody changing guidance for the full year on the calls."
The March 21 warning from industry leader Electronic Arts Inc, the first ever mid-quarter outlook cut from the company, cast a cloud over the entire sector in what is traditionally a slow sales period anyway for the $10 billion US games business.
EA spooked gaming investors, cautioning that sales of both old and new games fell short of expectations, compounded by shortages of Sony Corp's PlayStation 2 and Microsoft Corp's Xbox.
None of EA's competitors made subsequent warnings, but all have suffered in the market.
Since March 21, EA shares have lost about 20 per cent, Take-Two Interactive Software Inc. shares are down 14 per cent, Activision Inc. shares have fallen more than 15 per cent and THQ Inc. shares have shed 13 per cent. In that time the Nasdaq lost 4 per cent.
"I think they'll just demonstrate that nothing fundamentally has changed in these businesses since EA preannounced," Argento said.
According to Reuters Estimates, within the last week two analysts have lowered their earnings forecasts for Activision, though none have made similar changes for THQ or EA.
Analysts say any upside to estimates in this quarter would be a definite surprise, with the most likely source being early strong sales for Sony's PlayStation Portable handheld.
Looking To Fiscal 2006
Since EA, THQ and Activision will be reporting at the end of their fiscal years, investors will be keen to see what they expect from fiscal 2006, particularly if they factor in sales of the Microsoft's next-generation Xbox, due this fall.
