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solzberg in Gainers & Losers,

Shares of Electronic Arts up on robust FQ2 results

Electronic Arts (EA), a US-based producer of video games for consoles, personal computers, mobile phones and tablets, issued solid financials for its fiscal 2017 second quarter ended September 30. Net revenues increased 10.2% y-o-y to $898 mn, mostly in line with consensus estimates. Digital revenues (63% of revenues) jumped 13% to $566 mn while revenues from EA’s Packaging goods and other segment (37% of revenues) rose 6% to $332 mn. The improvement was driven by strength in EA Sports titles and mobile games like Star Wars: Galaxy of Heroes and FIFA Live, NBA Live. Operating loss was $49 mn, much narrower than $119 mn reported in the prior-year quarter. GAAP loss per share of 13 cents also declined notably compared with a loss of 45 cents in the year-ago quarter. On an adjusted basis, earnings per share came in at 43 cents and were way ahead of analysts’ average projection of 29 cents.

EA exited FQ2 with cash and short-term investments of $3.266 bn. Net cash provided by operating activities was $109 mn for the quarter, and trailing twelve month operating cash flow was $1.1 bn. During the reported quarter, the company repurchased 1.6 mn shares for $127 mn. It still has $282 mn worth of shares remaining in the buyback authorization.

EA upped its full fiscal year 2017 guidance given anticipation of strong demand for new Battlefield and Titanfall games and strength in mobile games. The company expects to generate GAAP revenues of approximately $4.775 bn compared with the previous forecast of $4.750 bn. GAAP earnings are expected to be $2.69 per share, up from $2.56 per share projected earlier. Free cash flow is expected to be $1.2 bn.

I believe that EA’s popular franchises, and strength in digital business, especially mobile, will remain key growth catalysts going forward. 

Solid FQ2 results helped EA's shares to rebound from 2-month low. I'd buy on breaking $80 level, with medium-term target at $90.