Gamer outrage over Electronic Arts' in-game moneymaking plans in its "Star Wars Battlefront II" title will hit the company's bottom line, according to one Wall Street firm.
Cowen reduced its price target and profit forecasts for Electronic Arts shares, predicting poor sales of the company's "Star Wars" title after gamers' reaction prompted EA to temporarily disable all microtransactions, or MTX, in the game.
"We are lowering our FY18 estimates to below management's guidance as we believe that Star Wars Battlefront 2's performance (lower units + the indefinite delay of MTX) has been disappointing enough to more than offset any strength elsewhere in the model," analyst Doug Creutz wrote in a note to clients Thursday titled "Cutting numbers on problematic 'SWBF2' performance."
"The negative player reaction to the mishandled loot box economy has clearly impacted SWBF2 sales … we think this is evidence that the industry's core gamer constituency is getting increasingly unhappy about the degree to which MTX is being shoehorned into core gameplay loops," Creutz wrote.
Creutz maintained his market perform rating and reduced his price target to $104 from $106 for EA shares, representing 4 percent downside to Wednesday's close.
The analyst also lowered his fiscal 2018 estimate for "Star Wars Battlefront II" unit sales to 11 million from 14 million. As a result, he reduced his EA fiscal 2018 earnings per share forecast to $4.08 from $4.24 versus the company's $4.20 guidance.
"Even factoring in the shift to digital units, it seems pretty likely that initial total sales will wind up being 20%-30% behind the pace of the original Battlefront, with bigger-than-normal price cuts also likely needed to move inventory," he wrote. "We think that the poorly-reviewed Need for Speed: Payback is probably underperforming as well."
Electronic Arts announced Nov. 16, a day before the "Star Wars Battlefront II" game's official launch, that it is temporarily turning off all in-game purchases for the game in response to negative sentiment from gamers.
"It's clear that many of you feel there are still challenges in the design. We've heard the concerns about potentially giving players unfair advantages. … Sorry we didn't get this right," EA wrote in the post.
EA's stock is up 38 percent year to date through Wednesday compared with the S&P 500's 20 percent gain. However, recently the game company's shares are underperforming, declining 8 percent since the end of September versus the market's 6 percent return.
The company did not immediately respond to a request for comment.