Video game designer Electronic Arts
EA's first-quarter report was actually pretty good. GAAP sales fell 20% year-over-year in a seasonally challenged early summer quarter. EA lost $0.72 per share in GAAP net income terms, again worse than last year's $0.30 loss per share. As terrible as all of that sounds, analyst estimates and management guidance had been indicating even worse news. CEO John Riccitiello even told us that "good execution delivered better-than-expected financial results in the first quarter." This is no guessing game, folks. EA is happy about this quarter.
But that better-than-expected performance didn't change how EA sees the 2010 fiscal year working out. Despite happy surprises on both the top and bottom lines, the company is sticking stubbornly to previous guidance. And so the stock is trawling along at prices about 60% lower than the 52-week high of $50.17 per share.
How can EA snap out of this funk? Archrival Activision Blizzard
There are bright spots in all this darkness, though. EA has become a big presence in the wireless market, and sales to the cell-phone crowd now make up 6% of the company's sales. The Nintendo (OTC BB: NTDOY.PK) Wii is another winner: It's the only gaming console for which EA is selling more games than last year, rather than less. That platform represented fully 25% of EA's revenue this quarter, edging out sales for Sony's
The slow summer season is slipping toward its finish. With the much more lucrative fall and holiday periods up ahead, this would be a good time for EA to right the ship. Rock Band: The Beatles might be its ticket to ride. But management's own pessimistic outlook can't be a good sign. EA may be cheap today, but it seems to be heading in the wrong direction entirely. All of the other big gaming stocks seem less risky.
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Fool contributor Anders Bylund owns shares in Take-Two, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.