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Don’t Hit the Panic Button on Electronic Arts Inc. Stock … Yet

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Electronic Arts Inc. (NASDAQ: EA ) delivered its second-quarter results Tuesday after the markets closed and while some of its guidance missed the mark, it was generally a good report, suggesting the momentum EA stock has seen so far in 2017 should continue.

Don't Hit the Panic Button on Electronic Arts Inc. Stock ... Yet

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First, the numbers, and then I'll get into some more substantive stuff.

On the top-line, EA increased revenue in Q2 by 7% to $959 million from $898 million on the strength of its digital net revenues, which rose 22% from a year earlier. Its net bookings were $1.18 billion, which includes online-enabled games, also up by a little more than 7% in the quarter.

Electronic Arts lost 7-cents-a-share in Q2 2017, 6 cents better than a year earlier and 7 cents better than analyst expectations.

Why EA Stock Is Taking Some Flak

Where EA stock might take some heat is from its guidance for the rest of fiscal 2018. In Q3 2017, EA expects net bookings of $2 billion , a bit shy of the $2.05 billion expected by analysts. For the entire year, it has been estimating $5.15 billion in net bookings; also a bit shy of the $5.2 billion analysts were expecting.

On the bottom line, EA expects to lose 21 cents in Q3 2017, 27 cents worse than analyst expectations. For the entire year, it sees $3.63 in earnings-per-share, also lower than the $4.25-per-share analysts are expecting.

However, it's important to remember that EA is being conservative with its Q3 guidance.

"We always try to be conservative … Christmas is always the toughest time to predict how business is going to be," CFO Blake Jorgensen told Reuters .

In last year's Q2 2016 release, it estimated that it would lose 17 cents in the holiday quarter; it delivered a loss-free quarter at $0.00, so you can expect this year's number to be much better than guidance.

In its conference call with analysts, CEO Andrew Wilson was a more upbeat about the holidays.

"We are now well-positioned for the holiday quarter," stated Wilson. "We will add the momentum with two massive new experiences, a new event-driven live service and more competition."

Before releasing its earnings, InvestorPlace's Joseph Hargett discussed some of the good things happening with EA titles in 2017. One of the massive new experiences Wilson talked about is Star Wars Battlefront II .

"On November 17, Star Wars Battlefront II will launch worldwide. This is a game that is nearly three times the size of the previous Battlefront, delivering an untold Star Wars story in our single-player campaign, multiplayer battles and dozens of ships, settings and heroes from all three Star Wars eras," stated Wilson in the EA earnings conference call. "Star Wars Battlefront II feedback from the beta and the added assets that we've put in the marketplace have been very strong. Feedback on gameplay was very positive. The beta was very robust and probably one of the most stable betas that we've had."

Bottom Line on EA Stock

Those aren't the words of a CEO who's worried about the future. Between Battlefront II and its FIFA and Madden NFL sports titles, business looks to be getting better by the quarter.

If you look at its trailing 12-month revenue, up 26% year-over-year to $5.08 billion and operating cash flow, up 36% to $1.8 billion, those are hardly the numbers of a company that's going in reverse.

If you own EA stock, I would continue to hold on any weakness and even consider buying some more if you're planning to own for the long-term. If you don't own EA stock, I don't believe there's anything in its Q3 2017 earnings report that should scare you away.

The EA stock price might be tumbling right now, but the bigger picture isn't as grim as the fall might suggest.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.

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The post Don't Hit the Panic Button on Electronic Arts Inc. Stock … Yet appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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