EA’s Earnings Pop Stock—Will the Rally Outlast a Skeptical Market?

Electronic Arts’ latest earnings report sent shares soaring—but Wall Street’s already side-eyeing the sustainability. Another ’beat and raise’ theater, or is there real gameplay here?

Bullish guidance and cost cuts got traders mashing the buy button. Yet with gaming stocks historically volatile post-earnings, the champagne might be premature. Remember: EA’s CFO still gets paid whether the rally holds or not.

Video game Publisher Electronic Arts (EA) posted a better than expected quarterly earnings statement, and their stock jumped as a result, but investors may want to be cautious.

EA stock climbed 0.69% during Thursday’s trading session, due entirely to the company’s impressive earnings- a net revenue of $1.9 billion for the most recent quarter. That is far better than Wall Street experts had predicted, and the company was able to extend its guidance moving forward as a result. They also managed to drop their operating expenses by 5% for the quarter, impressing their investors.

EA did particularly well with the launch of the new game Split Fiction, which sold about 4 million units. Their Sims franchise also did very well this quarter, reconnecting with their player base through new content releases despite the lack of a new game coming out.

Net bookings for EA’s Madden NFL and College Football series gained 70% in net bookings, an impressive feat for the long-running series. On the downside, the company expects its Apex Legends game to continue to lose players year over year as that game runs out of steam. By next year they anticipate a loss of 40% of the player base.

EA has its big franchises to fall back on for the next quarter, including two football series and the Sims, but there are no major releases scheduled for the current quarter. The company is planning to reveal the next Battlefield game this summer, but that will likely not be released until late in the year, probably close to Christmas, if it even releases this year.

On top of that, the company will have trouble sustaining interest in its current big franchise unless it releases new content. Split Fiction was a surprise hit, but there may not be another such hit for the current quarter, which WOULD leave investors losing out for the second half of the year.

We expect EA stock to take a dip over the next few months, though it may recover by the end of the year. Investors should anticipate summer lows that will be hard to turn around very quickly unless EA manages to launch new content or has another surprise hit on their hands.