EA Stock: More Than Just a Game
Electronic Arts Inc. (NASDAQ:EA) is my go-to franchise for sports games. Its titles offer game play and graphics that go above and beyond anything else. My first venture into the company’s sports game franchise was NHL 91. It cost me approximately $65.00 to get my hands on that title. In hindsight, I wish I had spent $60.00 buying EA stock, as I would have netted a return of 3,363%. Imagine the number of games I could have bought with that return.
Today’s Electronic Arts is a far cry from the company it started up as. The innovation and depth of EA’s games is why it has survived and flourished where others have not. Electronic Arts boasts having the longest-running sports video game franchise in Madden NFL, 28 years and running. That’s just one of its many sports titles.
EA stock is challenging its 52-week and all-time highs. The following three reasons support further gains for this pick:
Astonishing Presence and Growth
Electronic Arts has attained stardom. EA is the No. 1 publisher of titles for the “Xbox One” and “PlayStation 4” consoles for fiscal year 2015. It is also the No. 1 most downloaded mobile games publisher for fiscal 2015. Electronic Arts also has more than 300 million registered users worldwide and 54 million unique players engaged in EA titles, up 65% year-over-year.
This translated into record-level non-GAAP (adjusted) revenue, profitability, and cash flows. The latest quarter beat both the top and bottom line. Earnings-per-share (EPS) expectations were $0.40. The company posted EPS of $0.50, beating expectations by $0.10, or 25%. Growth was seen in all aspects of the business, including mobile, console, and PC. Gross profit margins increased year-over-year and are expected to continue rising. The reported numbers were outstanding.
Management has done an excellent job taking the required steps for EA to become the leader in digital interactive entertainment. Management is upbeat about the future prospects and expects to drive growth further in the future. This should translate into more rewards for EA stock investors.
First to Market
The way users now engage in gaming has changed quite drastically. A genre once dominated by consoles is now losing share to mobile smartphone games. The number of users engaging on the mobile platform is staggering. Console numbers cannot even compare to mobile engagement numbers, as mobile and digital engagement grows at an exponential rate.
Electronic Arts has adapted quite well to the mobile gaming revolution. A company once based solely on revenue generated from console and PC gaming now generates more than half of its revenue from digital downloads and that metric is expected to increase going forward.
The titles in EA’s library are ever increasing and the ability to interact with other users opens the landscape of gaming and takes it to a new level. There is a reason why Electronic Arts is the No. 1 publisher for fiscal 2015. It dedicated time and money to innovate and improve franchise titles. It is at the epicenter of gameplay that engages users like no other publisher. I don’t see anyone taking that title from EA anytime soon.
Record-High EA Stock Price
EA stock has been caught in a consolidation pattern for approximately 12 months. This level also coincides with the previous all-time high of $71.16 in March 2005 (not shown on the chart). June saw a close above the trend.
Chart courtesy of www.StockCharts.com
The close confirms the breakout and signals that the sideways consolidation has ended and the trend higher has resumed. The initial target based off this pattern is $95.00.
The Bottom Line on EA Stock
Electronic Arts has taken the necessary steps to lead and innovate in the gaming genre. Its titles are top-notch and management has taken the necessary steps to drive growth and innovate, resulting in an outstanding earnings numbers. The future for EA stock is bright.