Electronic Arts shares drop after Wall Street raises concerns over ‘Star Wars’ game sales

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Gamers play the video game ‘Star Wars Battlefront II’ developed by DICE, Criterion Games and Motive Studios and published by Electronics Arts on Sony PlayStation game consoles PS4 Pro during the ‘Paris Games Week’ on October 31, 2017 in Paris, France.

“Star Wars Battlefront II,” Electronic Arts’ biggest game this holiday season, is the big question mark for the high-flying stock.

The video game publisher reported better-than-expected fiscal second-quarter earnings on Tuesday and raised guidance for the full year, but its December quarter forecast was slightly below Wall Street estimates.

EA shares were down 4.8 percent shortly in early Wednesday trading, after falling as much as 4 percent after-hours on Tuesday following the earnings report.

“Despite raising F18 guidance, investors may focus on below-consensus F3Q EPS, reflecting some expense timing shifts and lower-margin licensed titles [such as Star Wars],” Baird analyst Colin Sebastian wrote in a note to clients Wednesday.

Sebastian reiterated his outperform rating and $130 price target for EA shares.

Jefferies’ analyst said he is not totally confident about the financial success of EA’s “Star Wars” game release this month, questioning whether users will behave the same way as users of EA’s other popular games.

“If Star Wars can encourage users to spend real money on virtual goods (like FIFA) the game could drive meaningful upside to F’18 and ’19 EPS, but this is not a certainty,” Jefferies analyst Timothy O’Shea wrote in a note to clients Wednesday entitled “Star Wars Battlefront 2: A Trick Or a Treat?”

One Wall Street analyst said he is worried EA’s financial guidance may not be low enough. Though he thinks EA is well positioned for growth over the long-term, with a strong presence in the rapidly growing mobile gaming segment, Cowen analyst Doug Creutz said in a note, “We think FY18 guidance is not as conservative as usual, and that there are few interesting catalysts to drive incremental investor interest over the next 12 months.”

Creutz reaffirmed his market perform rating for EA shares and a price target of $106, which is 11 lower than Tuesday’s closing price.

EA’s stock is up 52 percent year to date through Tuesday compared with the S&P 500’s 15 percent gain.

The company did not respond to a request for comment on the Wall Street analyst research.