Currently, Electronic Arts (EA, Financial), Activision Blizzard (ATVI, Financial) and Take-Two Interactive Software (TTWO, Financial) account for the most significant contenders of the gaming industry. As a matter of fact, Take-Two was the best-performing gaming stock of 2016.
Electronic Arts also performed well in 2016. The stock was up approximately 15%. The game publisher moved upward in the gaming industry due to its strong domination on significant gaming titles. Furthermore, the company’s titles are being rapidly adopted by key platforms.
Moving ahead, the PS4 Pro and upcoming Xbox Scorpio also unlock substantial sales opportunities for the company because both consoles are capable of playing 4K games.
In 2016, the company released several major gaming titles, including "Battlefield 1" and "FIFA 17", that reinforced its position in the industry and displayed decent results for the first two quarters of fiscal 2017. In fact, FIFA and Battlefield were the top two best-selling games in October 2016, establishing the company as the top publisher for the month.
In particular, "Battlefield 1" sales are growing more rapidly than its predecessors. Furthermore, the company revealed "Battlefield 1’s" first week user base was twice that of "Battlefield 4," the previous installment.
On the other hand, Electronic Arts’ new game “Mass Effect Andromeda” is scheduled to launch on March 21, which could prove to be a significant source of revenue in the upcoming quarters.
Apart from this, mobile gaming is displaying positive signs of growth. Surprisingly, mobile gaming already accounts for 37% of overall gaming revenue around the globe. Currently, the total revenue generated from the segment sits at approximately $37 billion. Although mobile gaming does not seek much attention, the revenue generated from it is projected to surge at a compound annual growth rate of 6.9% over the next five years.
Due to the positive outlook for mobile gaming, the company is belligerently focusing on producing mobile games. Electronic Arts is mainly known for its sports games, so it is using its sports customer base to gain a strong lead in mobile gaming. For instance, "Madden NFL Mobile" played a significant role in increasing sales in the mobile segment.
Summing up
It looks like Electronic Arts is moving in the right direction. The company’s latest games are performing much better than expected, which is good news for shareholders. Moreover, the company’s mobile business is growing at a healthy rate and surged 21% year over year in the prior quarter.
Most importantly, while virtual reality is still in its infancy, it will unlock huge growth opportunities for game publishers in the future. As a result, Electronic Arts is a strong buy for investors looking to profit from the gaming market.
Disclosure: No position in the stocks mentioned in this article.
Start a free 7-day trial of Premium Membership to GuruFocus.
