Electronic Arts (EA, Financial) is progressing at an impressive rate. The gaming company has delivered strong results that justify its expensive trailing P/E ratio. Let's take a closer look at its performance and prospects.
A closer look
Electronic Arts announced non-GAAP net revenue of $775 million for first fiscal quarter ended June 30, 2014 and above its guidance of $700 million. The company expects non-GAAP net revenue in the second quarter of 2015 to be approximately $1.14 billion.
Electronic Arts reported non-GAAP diluted earnings per share of $0.19, above its guidance of $0.05 and better than the non-GAAP diluted earnings per share of $0.40 during the same period last year. The company expects non-GAAP diluted earnings per share for second quarter fiscal year 2015 to be approximately $0.50.
Impressive performance in the cards
EA is committed to its players and keeping them first; the company is keen on delivering superior entertainment, creativity, innovation and value.
EA is believed to be very well-positioned to deliver on its commitment in FY15 with a solid pipeline of fresh new titles and exciting content. More than 300 million registered players across the globe are deeply involved with the ongoing entertainment provided by the games and services of the company today.
Gamers enjoyed more than 13.6 billion online sessions of EA games during the last quarter, totaling about 2.4 billion hours played across PC, mobile and console experiences.
Fight fans guided excellent sales of EA Sports UFC, exceeding its expectations during the quarter. The game is quite popular on other gaming platforms, with EA viewed to holding the top slot on Xbox One and PlayStation 4.
During the quarter, EA launched the third expansion pack for Battlefield 4 called “Naval Strike” in April, whereas the first content of Titanfall’s package “Expedition” was released in May.
EA's top mobile games attracted more than 140 million monthly active players during the first quarter. The key launches include The Simpsons: Tapped Out, The Sims FreePlay, Real Racing 3 and FIFA 14. The unique new content such as Real Racing 3 Le Mans update attracted 2 million players.
EA plans to deliver games full of emotion, innovation and creativity that are expected to bond, motivate, confront and entertain players.
Getting better
EA has grabbed a solid opportunity to involve its players by launching the live multiplayer beta for Battlefield Hardline at E3. In addition, this game has logged a record 1.7 million players enjoying the beta on PC and PS4, registering more than 4.2 million session hours in just two weeks.
Several more hours of Battlefield 4 gameplay and content are still to be launched, which includes “Final Stand” launching in the third quarter. The expansion packs “Dragon’s Teeth,” has already been launched.
EA SPORTS is believed to attract huge excitement and emotion with amazing gameplay, dramatic visuals and superb detail and depth. FIFA 15, NFL 15 and NBA LIVE 15 are all gaining popularity in the next year of the new console generation.
Maxis is forecasted to launch The Sims 4 during the start of September to its massive fan base.
The management is keen on delivering unique and entertaining new gaming experiences to players on mobile devices. Madden NFL and new FIFA experiences are believed to get launched in the second quarter coupled with an exciting new update for The Simpsons: Tapped Out. A much-awaited new Peggle game from PopCap is preparing for launch, and its EA Mobile studios have four other amazing new experiences from additional key franchises under development. These new titles are expected to be introduced for Android and iOS players in the future.
Michael Pachter, an analyst with Wedbush Securities, recommends a “Buy” rating for the stock owing to the confidence about sales rebound.
Eric Handler, an analyst with MKM Partners, gives a “Neutral” rating for the stock due to the fact that EA does not have many catalysts regarding games in the near-term coupled with the delay might lower the holiday sales of EA by nearly 2 million units.
Key statistics and conclusion
According to Yahoo Finance, the trailing P/E and forward P/E ratios of 1,454.23 and 16.51, respectively, represent healthy cost-cutting efforts, coupled with an improvement in the company operations. The PEG ratio of 0.81 is impressive and suggests healthy company growth, comparable to the industry’s average of 0.85. Finally, investors are advised to invest in Electronic Arts looking at the robust long-term growth prospects as indicated by the CAGR for the next five years per annum of 24.33%, above the industry’s average of 21.29% and expect promising returns in the long run.
