Growth Momentum Can Continue For Electronic Arts

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May 14, 2015

The video game market has been constantly as more and more people are getting hooked with video games. The decline in the price of the gaming hardware is another important factor that has leveraged growth of this market, as the gaming hardware is now more affordable to gamers. This gaming market that is witnessing a growth momentum has leveraged various gaming companies to acquire a larger share of this mammoth gaming market size.

Electronic Arts (EA, Financial) is one such company that is all set to have a bigger bite of this market. The company in the past has impressed the investors as its stock price gained around 50% in one year. This growth momentum may further continue. I have explained this in the rest of the article.

Quarter overview

The company recently released its result for the final quarter of the fiscal 2015, and this was firing all cylinders by setting new records. The revenue was up 5.5% year over year, to record $1.185 billion as compared to $1.123 billion in the same quarter last year. On an annual basis for fiscal 2015, the revenue surged 7.4%, to record $4.32 billion as compared to $4.02 billion in fiscal 2015.

The growth in the revenue was primarily driven by strong sales of Battlefield Hardline and much above the expected growth in catalog titles. The growth in number of mobile gamers also increased and new gaming modalities to play globally also contributed to growth in revenues. The Mobile revenue contributed $524 million for the fiscal 2015; this is a new record for EA.

Strategies that can propel growth

The company is investing in its gaming engine to leverage cross-buy across multiple products with the existing underlying infrastructure. It is also investing in new IP and in mobile IP to expand its customer base with enhanced features in the game. It further continues to provide strong support to EA's existing brand of games for the gamers for a higher level of satisfaction. This strategy of the company will further boost the top and the bottom line and the effectiveness of their products.

To further curb marketing expenses, the company is focusing on more efficient marketing by use of its digital connection with their customers. This can help in improving its operating expenses and influencing the bottom line.

Streaming is technology that is still in its early stage. By deploying this technology it allows the gaming content to be delivered across various platforms like streaming from small screen of tablet or Smartphone onto TV that has bigger screens. EA has been focusing on this technology to provide its Smartphone and tablet gamers a higher level of experiences. This further creates a market for EA as its games can even be played without the use of gaming consoles.

The company is also focused on the data acquisition of the gamers that allows the company to understand its player on a broader aspect. This allows the company to understand how player’s engagements work when a player engages more than one platform and even how it works when player plays more than one franchise. Such data can always help the company as it enables the company to know the probability of a player to buy the next version of the game. The company uses this data to build more efficient games and also provide improved and engaging experience to gamers that can enable a gamer to keep playing for a longer duration and benefit EA.

Share repurchase

The company stays focused to safeguard its investors. This is exemplified with its share repurchase programs which also positively leverages the EPS value. In the quarter, the company spent $95 million to repurchase 1.8 million shares. Furthermore the board of the company has authorized to allocate $1.0 billion under its revised share repurchase program, the revised programs ends on May 31, 2015.

Conclusion

The company has been accredited with award-winning games and has been delivering a sustained entertainment to its gamers. The global audience base of its gamers across mobile devices, gaming consoles and desktops are witnessing constant growth. The company also maintains a strong portfolio of games, with a continued growth momentum in mobile market. I feel this growth momentum will further continue to impress the investors, and it wouldn’t be a bad idea to press the buy button for EA.