So, there’s been some hubbub around Electronic Arts over the last few days, as the company ramps up for the release of its third quarter earnings on February 1st. Yesterday, EA’s stock closed at $17.54 per share, which, in context, meant that the gaming goliath’s stock was down 30 percent since hitting its 52-week high in early November. This drop was mostly due to the collective shock relating to the news concerning its recently released title, Star Wars: The Old Republic, which now has a ridiculous price tag attached to it — as Wall Street is estimating the cost to be between $150 and $200 million.
EA’s studio responsible for creating the much-touted online game, BioWare, spent some six-odd years developing Star Wars, and obviously there are concerns over whether or not the game will be able to satisfy the geeky desires and high expectations of both Star Wars fans and the avid World of Warcraft-playing, MMO gaming fans — especially as they’ll need to sell millions. Not always an easy audience to satisfy, but an eager and quick-to-spend audience if the game meets expectations — as the LA Times points out. (Though Trion has been having some serious success in this arena — see our post from yesterday.)
Some are saying that it could be the most expensive online game in history, and at $60 a pop, obviously there are those concerned that the deficit will be too great. However, analysts at Macquerie Equities Research today said that they believe initial sales of Star Wars will still be relatively good, and are still on track to hit their target of 1.5 million. It also helps that the costs were already absorbed into EAs financials.
Macquerie said that how the stock will perform will be largely affected by Star Wars’ sales, but if sales get close to their projection of 1.5 million, the firm expects the stock to make a bounce-back. While some are saying that, because EA hasn’t announced sales numbers yet, the likelihood is that sales have been not-so-good. Instead, EA has only said that it’s in a “quiet period” and will not be commenting as a result. Fair enough.
Others have said that the analysis of the game’s server loads show that there isn’t as much activity, but Macquerie would like to remind those people that it’s not easy to make accurate estimates of the numbers of users based on server loads — especially without knowledge of how they’re allocating server loads.
Glitches and mechanical problems have also been mentioned as influencing poor sales and low excitement, but, again, Macquerie defends EA, saying that, while this could affect the long-term outlook for the game, these kinds of problems are expected at initial release, and may not have as big of an affect as some might believe.
Thus, Macquerie isn’t having any of this nay-saying, and is expecting EA’s stock to outperform — and be on the rise. The game will need about 500,000 subscribers to get close to even, and, of course, the other side is that, they could be way ahead of the ball, and if they were to get several million, well than what one analyst called “the single largest bet” of the EA CEO’s career might just turn out to be an enormous, money-raining win.
What do you think?