Shares of Electronic Arts (EA - Free Report) rallied to a new 52-week high of $148.74, eventually closing a tad lower at $148.61 on Jul 12. This Zacks Rank #3 (Hold) stock has a market cap of $44.6 billion.
Shares of Electronic Arts have been witnessing an upside, appreciating 41.5% in the year-to-date period compared with the industry’s rally of 25.2%.
Electronic Arts is well-positioned to benefit from strength in its digital business and its popular franchises. Notably, digital business contributed 68% to its total revenues of $5.2 billion in fiscal 2018.
Additionally, the company has been the primary beneficiary of the ongoing shift from physical to digital versions of video games. Therefore, to cash in on the booming digital games market, EA plans to expand its mobile portfolio by releasing a few more games in the coming months.
Moreover, its recent acquisition of Industrial Toys will help it further deepen its roots in the digital games market.
EA has a solid lineup for fiscal 2019 with releases such as Battlefield V, Anthem, NBA LIVE 19 and Madden NFL 19.
EA to Boost Presence in Digital Markets
As consumers are increasingly spending more on smartphones and portable devices compared with traditional devices for playing online games, EA is well poised to benefit from this ongoing shift.
Moreover, according to Newzoo’s market research data, more than 50% of the revenues will come from mobile games by 2020.
EA is expected to derive benefits from a growing mobile games market as it launched The Sims mobile game this March, after the success of Star Wars: Galaxy of Heroes and FIFA Mobile. Furthermore, the company’s entry into cloud gaming technology with the buyout of wholly owned subsidiary of Gamefly Inc will help it enrich its presence in digital markets.
With more and more people having access to portable games, we believe that EA’s move in this direction will lead to top-line growth.
New Titles to Boost Growth
EA’s popularity is primarily driven by its well-known franchises, which will continue to fuel top-line growth. EA SPORTS titles FIFA, Madden NFL, NBA Live, NHL, and UFC, along with Battlefield, Titanfall and Star Wars are some of its biggest franchises.
Notably, in the last reported quarter its digital revenues increased 18% to $1.102 billion on Battlefield 1, Ultimate Team and Madden NFL 18 full game downloads. Additionally, management believes that the launch of Battlefield 2 and Anthem in fourth-quarter fiscal 2019 will help it cater to a larger audience and drive long-term growth.
Furthermore, EA’s e-sports category is helping the company to grow internationally in regions like China, Korea, the Middle East and more. Notably, e-sports has been gaining popularity since the last few years and is currently worth more than $500 million.
Moreover the company’s strong foothold in this category will help it face competition from both Activision (ATVI - Free Report) and Take-Two Interactive (TTWO - Free Report) .
EA has a strong earnings surprise history. It beat the Zacks Consensus Estimate for earnings in the trailing four quarters with an average positive surprise of 26.79%.
Over the last 60 days, the Zacks Consensus Estimate for fiscal 2019 increased a couple of cents to $5.04, indicating year-over-year growth of 24%. The Zacks Consensus Estimate for revenues is currently pegged at $5.59 billion, up 8%.
Stock to Consider
A better-ranked stock in the broader technology sector is Twitter (TWTR - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
The long-term projected earnings growth rate for Twitter is 23%.
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