Stock – MMO Fallout

Electronic Arts closed on February 6, 2019 at the price of $80.21 USD following news that the publisher’s third quarter fiscal results did not perform to its expectations. The continued price drop threatens to wipe out the progress that EA had made in the first month of the year to begin recovery after its stock dropped to a low of $74.72 on December 24, 2018 following ten years of sustained growth that saw its stock peak at nearly $150 in July 2017 before steadily shedding much of that value over the following six months.

Since last December the stock price has been slowly inching its way back up, breaking $90 by January 10 and holding steadily for the past month. With the announcement that EA would miss its estimated revenue by approximately $140 million, at $1.61 billion for the quarter versus $1.75 billion, shares immediately dropped from $92.52 on February 5 to $79.26 on February 6.

EA CEO Andrew Wilson stated acknowledged that EA did not perform as he hoped, owing partially to the underperformance of Battlefield V.

“Q3 was a difficult quarter for Electronic Arts and we did not perform to our expectations. We are now applying the strengths of our company to sharpen our execution and focus on delivering great new games and long-term live services for our players. We’re very excited about Apex Legends, the upcoming launch of Anthem, and a deep line-up of new experiences that we’ll bring to our global communities next fiscal year.”

Activision Blizzard Terminates Its CFO, Netflix Poaches Him

As the year comes to a close, Activision Blizzard is making headlines with their announcement that it intends on terminating Chief Financial Officer Spencer Neumann for “cause unrelated to the company’s financial reporting or disclosure controls and procedures.” Mr. Neumann has not officially been terminated and has been offered the opportunity to demonstrate why cause does not exist to terminate his employment, however should he leave he will be replaced by acting CCO Dennis Durkin.

The news dropped in the form of a filing to the Securities and Exchange Commission today:

“Mr. Neumann has been placed on a paid leave of absence from the Company pending an opportunity for him to demonstrate why cause does not exist to terminate his employment or why termination of his employment is not otherwise justified. In light of the above, effective January 1, 2019, Mr. Dennis Durkin, our Chief Corporate Officer, will assume the duties of the principal financial officer (Chief Financial Officer) of the Company. In the event Mr. Neumann ultimately ceases to be the Chief Financial Officer, then Mr. Durkin will become the Chief Financial Officer. Mr. Durkin, 48, joined the Company in March 2012 as Chief Financial Officer and served in that role until May 2017. He has served in the role of Chief Corporate Officer since May 2017 through the present.”

Mr. Neumann may have brighter prospects on the horizon outside of Activision Blizzard’s corporate shenanigans, as the news also broke that Netflix is looking to bring him on board to serve as their own Chief Financial Officer.

Activision Blizzard stocks started the year at $64.31 USD, peaked at $83.39 in October, and has since dropped to a low of $46.57 at the close of the market today. The decline marks a sharp turn from the steady increase in Activision’s stock over the past two decades.

EA’s Stock Is Crashing, Down Over 40% Since July

Electronic Arts just can’t catch a break.

It’s been a rough year for Electronic Arts and it appears that the company’s investors are taking notice. In the last year that brought us the PR nightmare, consumer backlash, and subsequently underwhelming sales of Battlefront 2, the PR nightmare, consumer backlash, and subsequently underwhelming pre orders of Battlefield V, a criminal investigation in Belgium over refusal to comply with gambling laws, among other incidences, it looked like the backlash online was pretty much irrelevant as EA’s stock continued to climb.

All of this came to a head in July when EA announced that Battlefield V would be delayed, and EA’s stock began to tumble. From a peak of around $148, the stock now sits at $85.84 just five months later and continues to gradually fall. EA’s stock stood at $112 on November 14, 2017.

So what’s the deal? Oddly enough, EA isn’t facing much in the way of a financial shortfall. While the total revenue for the fiscal year 2019 is supposed to be lower, we’re talking $5.2 billion instead of $5.5 billion projected. The second quarter brought in $1.286 billion in revenue, $16 million above forecast, with a net income of $255 million, far above the prediction of $150 million.

It seems to stand that the downturn in market price has its hands in the negative sentiment surrounding EA that is finally turning into poor market performance. Their titles may still bring in millions of dollars, but EA burned Star Wars fans twice with Battlefront and the sequel subsequently underperformed. Similarly with Battlefield V, the company’s outward statement that players who didn’t like the art style of Battlefield 5 can “accept it, or don’t buy it” has simply led to players not buying it, despite EA’s recent backpedaling on the game’s cosmetic designs.

There is also the fact that more governments are beginning to take a closer look at microtransactions, a large source of income for Electronic Arts thanks to Fifa Ultimate Team.

Zynga Recovering With Higher Than Expected Earnings

Zynga’s stock has recovered most of its value following the announcement that CEO Don Mattrick would step down with Mark Pincus taking his place. Zynga’s stock fell heavily with Pincus’ return, down to a low of $2.38 from its $2.90.

Investors are responding well to Zynga’s latest quarterly results, in which the company announced severe downsizing. As part of proposed cuts, Zynga will shut down its $100 million dollar data centers and switch over to Amazon. In addition, the company will lay off 364 employees, nearly 20% of its workforce,

We need to be more resourceful in how we manage our costs in order to fund our investments in new games, people and data and analytics. We’ve overburdened our game teams with complexity and centralized expenditure.

The cuts are expected to save $100 million annually.

For the first quarter of 2015, Zynga’s daily active users remained flat (25 million) while monthly active users fell (100 from 108 million) and monthly unique users grew (73 million from 71 million). Revenue fell further, however earnings were higher than expected.

(Source: Zynga)

Zynga’s Stock Continues Shedding After Pincus Returns

Zynga’s stock continued shedding value today, just a day after the developer revealed that CEO Don Mattrick would step down and be replaced by founder and ex-CEO Mark Pincus. Zynga’s stock ended the day at $2.90, at which they lost about 10% in after-hours trading. Starting the day at $2.6, the stock fell another twenty two cents to end the day at $2.38, an 18% overall drop over the past day.

Mattrick’s departure comes after Zynga posted a $226 million loss for 2014, coinciding with the company closing shop in China. Despite the previous year’s performance, investors are not excited to see Pincus return to power. 2012 under Pincus proved to be disastrous as the company closed offices, laid off employees, shut down over a dozen games, posted a $200 million loss, lost much of its stock value, and saw blowback from its decision to purchase OMGPop to the tune of $180 million before shutting the studio down one year later.

Zynga’s value has so far not moved in after-hours trading.

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