GameStop’s warning on EA’s Star Wars game seen premature

The videogame publisher’s shares fell as significantly as 7 % on Monday after GameStop mentioned its sales of “Star Wars: Battlefront” had been weaker than anticipated.

Analysts and one particular top investor in EA stated it was premature to conclude that the warning was a sign of weak demand.

The comments from GameStop, the world’s largest videogame retailer, do not reflect digital videogame sales and come days ahead of Black Friday, traditionally the most significant purchasing day in the United States.

GameStop’s warning is “genuinely getting driven by an acceleration of digital downloads,” Cowen & Co analysts mentioned.

“It is also early to sound any alarm bells,” stated Christopher Merwin, an analyst at Barclays. “The success of ‘Star Wars Battlefront’ will be largely dictated by how it does digitally.”

The videogame sector has been shifting to distributing games digitally in recent years, with rising bandwidth and simpler access on consoles allowing players to download their favorite titles, rather than purchase physical copies.

Digital, a larger-margin company, has been increasing steadily, and comprised nearly 52 percent of EA’s income for the year ended March 31.

Matt Titus, a shareholder in EA and a portfolio manager at American Century Investment Management, termed Monday’s stock move an “more than-reaction,” adding that the Star Wars title had “some of the strongest pre-orders in the history of gaming.”

American Century is EA’s eighth greatest shareholder, with a three.03 percent stake, according to Thomson Reuters data.

An Electronic Arts spokesman declined to comment on early sales of the title or on GameStop’s remarks.

EA last month raised its forecast for sales of “Star Wars: Battlefront” to 13 million units for the year ending March 2016, up from its earlier estimate of 9 million to ten million.

The title launched on Nov. 17, a month ahead of Walt Disney’s release of “Star Wars: The Force Awakens,” the latest installment in George Lucas’ space opera franchise.

The game is expected to be a well-liked gift over the holidays for youngsters, adult Star Wars fans and gamers alike.

“I have a 7-year-old, she’s probably going to play the game, my neighbor’s kids are playing the game … none of them have ever seen a Star Wars film and they all want to play the game,” Titus said. (Reporting by Sai Sachin R and Anya George Tharakan in Bengaluru Editing by Anil D’Silva and Leslie Adler)

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