The gaming market is anticipated to reach $111 billion in 2015. Electronic Arts (EA, Financial) is one such company that has been focused on this growth market to leverage its top and bottom line.
Remarkable quarter
The company recently declared it third quarter results for fiscal 2015 and was firing all cylinders. The consolidated revenue increased by 39.3% year over year, to record $1.126 billion as compared to $808 million in the same quarter last year.
The operating expense of the company was reduced by $20 million to records $563 million as compared to $583 million in the same tenure last year. Gross profits increased by 149% year over year, to record $725 million as compared to $291 million in the same quarter last year. This is mainly due to the growth in sales and the decline in the operating expense.
Furthermore net income was $142 million as compared to net loss of $308 million in the same quarter last year. This had a positive impact on the EPS, and it recorded $0.44 (diluted) as compared to negative EPS of $1.00 in same period last quarter.
The revenue growth was mainly due to strong sales of EA’s FIFA, Madden NFL and Hockey Ultimate Team services and continued to increase, collectively up 82% year-over-year.
Journey ahead
For the fourth quarter of the fiscal 2015, the company anticipates consolidated revenue of $1.155 billion. EPS is anticipated to be around $1.07. After delivering a strong third quarter, the company has revised the revenue guidance for the fiscal 2015 as it entered the last quarter of the Fiscal 2015. The consolidated revenue for the fiscal 2015 is revised to $4.253 billion as against $4.175 billion. Diluted EPS is also revised to $2.35 per share as against the previous guidance of $4.175.
Furthermore analyst consensus expects the company to grow by 40.8% this year. The growth anticipated for next is around 10.9% , this again is higher than the sector growth of 8.5%. For next five years the company is expected to grow at 15.3% ever year, comparatively higher than the industry growth of 10.5% and sector growth of 13.24% .
EA also anticipates better results in upcoming quarters as it has been focused on various aspects to further improve profitability. It has been constantly working on delivering better content to gamers and enhances their gaming experience. The company also has few series of games in pipeline which will be soon unwrapped attracting more gamers and revenue for the company
Conclusion
The company has a decent forward P/E positioned at 14.85. However, in the long run, the company’s earnings are expected to grow at an impressive CAGR of 15.3%, which is attractive. The company also plans to release new games namely Peggle Blast, Star Wars Battlefront and Mirror Edge games, EA’s prospects look strong. In feel considering the strong prospects of EA, investors should press the buy button for EA as its set for further growth.
