Due to the growth of the entire gaming industry, I have been bullish on several gaming stocks. I recently recommended buying Activision (ATVI, Financial) on the pullback, and the stock has yielded close to 15% returns since then. This is a bullish case for Activision’s rival, Electronic Arts (EA, Financial).
A first step toward new development platform
Recently Electronic Arts publicized about FIFA 17 and Madden 17 which will launch on Sept. 27 and Aug. 23. The company also detailed that both the games will also be launched for Microsoft’s Xbox 360 and Sony’s PlayStation 3. However, EA also said that the imminent FIFA game designed for Xbox One, PlayStation 4 and PC will be produced by using a new development platform.
These new platforms will allow the games to make superior utilization of updated graphics capabilities, together with offering new modes and several elite features. Not only EA’s FIFA will comprise such features; Madden 17 also will contain new modes as well as downloadable content updates that were not part of last-generation versions of the game.
The primary reason to move away from last-generation consoles is the gradually declining sales of those consoles. The company’s strategy of torn-apart development for its chief sports franchise seems to be a nice way to carry on deriving sales from the massive user base on older hardware.
Why it matters
The initiation of mobile games has proven to be challenging for most of the game developers, but it seems that Electronic Arts has successfully grasped the change. A few years ago, the company’s mobile gaming business was irrelevant. But, as per its most recent quarterly results, the mobile platforms generated 12% of the company’s overall revenue.
This is a great achievement for Electronic Arts, and the company has achieved this success by developing games on its own as well as through acquisitions. Moreover, according to a report from SuperData Research, there were approximately 134 million esport viewers around the globe, and it projects that number will surge at a pace of 30% throughout the next five years.
The main point for Electronic Arts is that esports and live streams offer more effective opportunity to promote games compared to outdated advertisements.
Conclusion
I have been impressed by EA’s ability to improvise its business with changing fundamentals over the years. Going forward, I expect EA to continue growing due to the growth of mobile gaming and its new development platform. For these reasons, I am currently bullish on the stock.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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