Sony (NYSE:SONY) shares fell on Friday in reaction to Electronic Arts (NASDAQ:EA) cutting its guidance. The latter saw its stock drop by almost 17% after the gaming giant reported an 11% miss in net bookings for the third fiscal quarter and reduced its full-year net bookings guidance by 8%.
This revision was described by Macquarie as "surprisingly large." The cut to outlook is attributed to weaker-than-expected gamer reactions to the latest installment of EA Sports FC and disappointing sales for Dragon Age: The Veilguard. EA titles represent approximately 20% of Sony’s games software revenue.
Macquarie estimates that the cut in EA’s full-year guidance could lead to a more than 1.5% negative impact on Sony’s operating profit, potentially translating to a ¥10-15 billion hit. Despite this setback, there is a potential silver lining for Sony with the performance of other titles.
Free-to-play games like Fortnite by Epic Games and Marvel Rivals by NetEase (NASDAQ:NTES) have shown robust performance, with Marvel Rivals topping PlayStation’s free-to-play download chart in the US, Canada, and the EU in December.
Looking ahead, Macquarie suggests that Sony may not raise its full-year Game & Network Services (G&NS) operating profit (OP) guidance, which stands at ¥355 billion, compared to Macquarie’s forecast of ¥365 billion. This development may be slightly disappointing, but the firm maintains a positive outlook for Sony’s G&NS segment into the fiscal year ending March 2026.
Macquarie forecasts G&NS operating profit growth to ¥510 billion in FY3/26E, driven by first-party titles and third-party collaborations.
"We had indicated a near-term preference for Sony over Hitachi (OTC:HTHIY) (6501 JP; Outperform; TP: ¥5,000; risks) due to our games business profit growth expectation, while maintaining our longstanding long-term preference for the latter. The EA news mutes our near-term preference slightly," the analysts said.
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