Electronic Arts (EA) faces gaming pressure ahead of Q2 earnings

Electronic Arts Inc. (NASDAQ: EA) is scheduled to report its second-quarter 2020 earnings results on Tuesday after the market closes. The results will be benefited from digital revenues and an income tax benefit but costs are likely to overshadow the performance. The company has been constantly under the pressure from the Star Wars gaming community and core Battlefield V fans.

The company relied on new content and in-game events for recovering from the pressures. In the midst of heavy competition going on in the video gaming space, EA is likely to shine due to its ability to introduce new games with Star Wars Jedi: Fallen Order due in the mid of November. This turned out to be the most anticipated game with more pressure mounting in the community for its early release.

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Apart from this, people started going digital as digital bookings represented 76% of the business. The results will be driven by the success of games including FIFA, NFL, Plant versus Zombies, The Sims, Anthem, Apex Legends, and the much expected Star Wars. In the upcoming quarters, the company could be benefited from the strong possibility of multiple expansion as new titles are on the path of launch.

In the gaming industry, EA is the first to kick start the earnings season. Both EA’s rivals Activision Blizzard (NASDAQ: ATVI) and Take-Two Interactive Software (NASDAQ: TTWO) are slated to release their earnings results on November 7 after the market closes.

Analysts expect Electronic Arts’ earnings to decrease by 3.40% to $0.85 per share and revenue will decline by 3.1% to $1.25 billion for the second quarter. The company has surprised investors by beating analysts’ expectations in all of the past four quarters. The majority of the analysts recommended a “buy” rating with an average price target of $111.28 per share.

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For the first quarter, Electronic Arts posted a 385% jump in earnings helped by an income tax benefit. Total revenues increased by 6% driven by higher digital revenues. Digital net bookings for the trailing twelve months rose by 5% to $3.73 billion. During the quarter, FIFA Ultimate Team had more than three million players logging in daily during the Team of the Season in-game event.

Looking ahead into the second quarter, the company predicts net revenue of about $1.315 billion and earnings of about $2.60 per share, which includes about $2.08 per share of income tax benefit. For fiscal 2020, the company expects net revenue to be about $5.375 billion and earnings of about $9.22 per share, which include about $5.61 per share of income tax benefit. Net bookings are anticipated to be about $5.1 billion for fiscal 2020.

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