A Better User Experience and a Strong Pipeline Will Help Electronic Arts Deliver Strong Results

Author's Avatar
Feb 24, 2015
Article's Main Image

Electronic Arts (EA, Financial) had impressive strong results in the recently reported third quarter. The strong results by the gaming company came in majorly on the back of strong player engagement and strong traction that it is seeing for its gaming titles. With last quarter remaining to end the fiscal year, EA has become world’s leading console game publisher. The company is pleased to see this success and is confident that it will lead EA to better financial stability in the upcoming quarters. Furthermore, the solid revenue and earnings growth are expected to accelerate its cash flow generation which will also strengthen its balance sheet, attracting more investors. This will surge its shares, gaining market share in future.

Focus on user engagement can help EA get better

To ramp up its performance further, Electronic Arts is focusing majorly on user engagement. It is now focusing on various initiatives to engage more users leading to better profitability. However, the company has to face certain milestones in achieving this objective. Moving on, with the growing mobile phone usage, EA is seeing great opportunities and to fetch these, it has introduced many games on this platform and to its surprise it has resulted in a breakout performance in the holiday season.

This mobile platform is exclusively driven by Madden NFL mobile and FIFA 15 Ultimate, averaging about 45 million monthly active users. This growing traction is expected to continue in future as well helping EA to engage more customers, ultimately benefitting the company’s financial performance.

This is a million dollar platform for Electronic Arts and to creating a unique and leading image in this market it is bringing in many new games such as Madden NFL Mobile, FIFA 15 Ultimate Team, and SimCity BuildIt, Real Racing 3, The Sims Freeplay and the Simpson’s: Tapped Out. The company is expecting all these new games to create key opportunities for Electronic Arts in mobile platform. In addition, EA is getting positive response from the mobile platform and it is now gearing itself to entertain the players with new content.

Console growth is another catalyst

It is pleased to see strong growth across consoles such as Xbox One and PlayStation 4. To hold this profitable opportunity, Electronic Arts is now exciting new ways to add value to its console and PC segment also, driving more player engagement. Electronic Arts is bringing in many innovations and new games to strengthen its position in the market. It is excited about the launch of Battlefield Hardline which it thinks will deliver rich and innovative new experience to the users. It has got positive response after the Beta playtest of the game and is expecting it to be one of its major growth contributor in future when it launches the games in March.

The company is also positioning itself for long term as well. It is planning to release some exciting games out of its pipeline in 2016. In line with the golf’s biggest tournaments, EA will be releasing PGA TOUR. This is not enough as it will also bring back Need For Speed franchise in 2016 which also sounds exciting. This pipeline also includes games such as Star Wars Battlefront which are expected to have a great impact on the Electronic Arts’ growth in upcoming quarters.

Conclusion

With a trailing P/E of 22.24 the stock looks reasonable and the forward P/E of 22.01 shows healthy earnings growth in the near term. The stock can also be an investor’s choice as it stands attractive with an impressive profit margin of 19.02%. In addition, the company has also announced investments in new IP and innovations which are also expected to help the company in gaining market share in future. So as of now, Electronic Arts is definitely a good pick and the investors to give a thought to it.