"With the stock hovering near a seven-year low, management continued its recent history of disappointment," wrote Wedbush analyst Michael Pachter in a Wednesday research note. "Just when investors began to believe that things couldn’t get worse, they did, and we believe that investors remain skeptical that management is on the right track."
EA said Tuesday that it would be falling significantly short of fiscal 2009 guidance that ranges between $5 billion and $5.3 billion in revenues and earnings per share in the range of $1 to $1.40. The publisher also announced that it would be canning more projects and cutting more related staff in the year ahead, in addition to the 600 job cuts announced in October. The firm blamed lower than expected sales of recently released titles.
"Notwithstanding management insistence that it finally is taking the necessary steps to generate operating leverage, we think that investors have tired of the promise of a turnaround without the commensurate commitment," Pachter added.
Shares in the publisher were down 17 percent to $16.09 in late morning trading.
Signal Hill's Todd Greenwald speculated that EA could move to a $49 price point for "non-triple-A and mass market titles," down from the now-standard $59 price for console games. The analyst said sports games "seem to struggle" at $59.
Colin Sebastian with Lazard Capital Markets said, "Time will tell whether these steps will effect better market performance, but we believe more aggressive restructuring is appropriate given that EA has yet to demonstrate meaningful franchise growth or operating efficiencies midway through the current console cycle."
Arvind Bhatia with Stern Agee believes EA's moves to cut costs will eventually pay off. "We expect the company to emerge stronger once it realigns its products and cost structure to the new reality," he said.
But Pachter said that EA's longer-term fiscal 2011 goal is now unattainable, given the underperformance. "We are no longer confident that EA is taking the steps necessary to achieve its FY:11 goals of $6 billion in revenue and $1.5 billion in operating profit," he said flatly.
In September, Greenwald reiterated his doubt that EA would achieve that goal after the publisher walked away from its bid to buy Grand Theft Auto maker Take-Two.
The analysts' pessimism is a stark contrast from pre-downturn optimism in EA earlier this year.
Overall, the analysts' revised estimates for EA were between $4.6 and $4.7 billion in fiscal 2009 revenue, and earnings per share in the range of 68 cents to 75 cents.