Electronic Arts Inc.: EA Stock Poised for Double-Digit Gains

EA stockElectronic Arts Inc. (NASDAQ: EA) stock is a gaming powerhouse. EA stock’s portfolio of intellectual property includes major sports leagues such as the National Basketball Association (NBA), the National Football League (NFL), and the National Hockey League (NHL), among others, and multiplayer games such as Battlefield, Titanfall, and Star Wars.

The company has millions of players who are deeply engaged with their favorite games. The success and popularity of its game franchises has helped Electronic Arts stock deliver robust financial results and handsome returns to shareholders. Over the past year, EA stock increased 18%, and it is expected to continue achieving double-digit growth.

Electronic Arts Stock Earnings and Revenue Growth

Electronic Arts stock posted impressive a first-quarter financial performance for its fiscal 2017. EA stock’s adjusted earnings were $0.07 per share, above its guidance of -$0.5 per share, and the -$0.03 per share expected by Wall Street analysts.

EA stock’s  non-generally accepted accounting principles (non-GAAP) revenue was $682.0 million, which is higher than its guidance of $640.0 million, and the $650.38 million consensus estimate. Electronic Arts stock reported that its total GAAP net revenue was $1.27 billion, which is higher than its guidance of $1.25 billion for the quarter.

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Its solid financial results for the period were driven by its digital business, particularly the outperformance of FIFA Ultimate Team on the console and Star Wars: Galaxy of Heroes on mobile, according to the company’s CFO Blake Jorgensen. (Source: “Electronic Arts Reports Q1 FY17 Financial Results,” NASDAQ, August 2, 2016)

EA stock also delivered earnings and revenue that surpassed the expectations of analysts in the fourth, third, and second quarters of its fiscal 2016. Its average earnings growth was 89%, and revenue growth was 11.9% over the previous four quarters.

Electronic Arts Games Received Multiple Awards

During the recent earnings call with analysts and investors, Electronic Arts CEO Andrew Wilson noted that the digital transformation continues to strengthen and drive growth for the company.

Electronic Arts stock’s digital net revenue increased from $1.83 million in fiscal 2014 to $2.41 million in fiscal 2016. Electronic Arts expected its digital business to continue to grow in fiscal 2017 onward. The company is focused on developing and monetizing digital products and services. (Source: “Form 10-Q,” Electronic Arts Inc., August 9, 2016)

According to Wilson, the company’s major franchises have thriving communities. Its Battlefield titles have more than 11.5 million players while Star Wars: Battlefront has 6.6 million players in Q1. The players of Star Wars: Galaxy of Heroes spent an average on almost 2.5 hours of gameplay every day during the quarter.

Wilson also noted that the “EA Sports” titles for consoles have a tremendous number of players and engagement. The unique players of Madden NFL 16 rose 20% year-over-year. The game’s monthly players on mobile increased 25% from the same period last year.

Electronic Arts have more than 130 million monthly active users (MAUs) for its games on mobile devices for the three-month period ended June 30, 2016. The number showed that the company has a massive community of players. The company is committed to strengthening its player network by investing in a technology foundation that allows it to build player relationships that would last for years.

Electronic Arts believes that its games should be extraordinary, in order to connect more players with each other. The company is pushing the boundaries of creativity, technology, and new ways to play when developing games.

It is interesting to note that the games of Electronic Arts that were shown at the events EA Play and Electronic Entertainment Expo (E3) received 81 awards. E3 game critics recognized Battlefield 1 as “Best Action Game” and Titanfall 2 as “Best Online Multiplayer.”

The Bottom Line for EA Stock

Electronic Arts is a leader in the gaming industry. EA stock’s strong financial performance and compelling games demonstrate that its growth is unstoppable. Electronics Arts stock is poised to achieve another double-digit gain over the next 12 months.

EA stock gained around 20% year-to-date, which is higher than the stock performances of its bigger competitors in the industry, namely Microsoft Corporation (NASDAQ:MSFT) and Activision Blizzard, Inc. (NASDAQ: ATVI), up nearly three percent and over 14%, respectively.

Wall Street analysts covering Electronic Arts stock believe that the company will outperform the market. Nine of the analysts have a “buy” recommendation, and eight have an “outperform” rating on EA stock. They forecasted that Electronics Arts stock could trade for as much as $105.00 per share, which is an increase of 25.9% from its current trading price of $82.74 per share over the next 12 months.