Electronic Arts (EA, Financial) is a well-renowned company in the computer games industry and is the world's third-largest gaming company by revenue after Nintendo (NIN, Financial) and Activision Blizzard (ATVI, Financial). The stock has been on a great run since the start of 2014, appreciating over 200% in the time period. Although the stock is not as cheap as it once was, it still has more upside to offer.
Quarterly performance
The company’s sales and earnings grew YOY; however, its operating margin for the reported quarter was also up 500 basis points. Non-GAAP operating expenses were down 10 percentage points, to just 46% in FY 2015 from 56% of net revenue in FY 2013.
Non-GAAP diluted EPS surged, from $0.84 per share to $2.51 per share. The company’s extra content and subscription strategy contributed $1.3 billion in net revenue in FY 2015.
Non-GAAP digital revenue accounted to be $602 million for this quarter and mobile business generated $150 million for the Q4, an upsurge of 22% vs. previous year’s same quarter.
Strong pipeline
EA's robust performance is obviously due to its game label line-up. The last quarter game release, Dragon Age: Inquisition performance was record breaking. Sell-through was extremely healthy across the market. The game was released in November and grows into the most fruitful launch in gaming antiquity.
EA Sports claimed that it will stimulate the fans by latest releases of Rory McIlroy PGA Tour, Madden NFL, FIFA, NHL and NBA Live, comprising industry-leading gameplay, gripping new features and fresh Ultimate Team involvements.
FIFA 15 was the important title in Europe and a top 10 label in the U.S. Madden NFL mobile resulted in robust growth and was the 4th top earning game in the U.S. Apple App Store.
Star Wars is a big plus
Electronic Arts one of the popular games is “Star Wars: The Old Republic” huge multiplayer online game. In the previous quarter, the game resulted in the expansion pack “Shadow of Revan.” Star Wars fans were excited to see future growth in the Star Wars universe. They were deeply engaged in The Old Republic space.
In this quarter, the world got its latest Star Wars Battlefront look from the company’s DICE studio. The trailer was watched more than 29 million times representing a strong feedback. The company expects that Star Wars Battlefront will attract players into the Star Wars universe like never before. For Star Wars Battlefront to be launched in November, the company will influence the extent of their IP to reach a wider range of players across multiple categories and platforms in FY 2016.
Conclusion
Despite Electronic Arts’ strong growth over the past 18 months, it still looks like a great investment. The company has many revenue drivers and has been consistently making money from titles like FIFA and NBA. In addition, the company is also benefiting from its Star Wars title. While the company’s past performance has been terrific, its upcoming titles also look appealing. Investors should consider adding Electronic Arts to their portfolios.
