10 Updates
Electronic Arts Earnings Preview: Strong Portfolio To Support Digital Growth

Electronic Arts Earnings Preview: Strong Portfolio To Support Digital Growth

Jan 28 2014, 7:20am CST | by

Electronic Arts is expected to announce earnings for the third fiscal quarter of 2013 on Tuesday, January 28. The video game maker had three titles on the list of NPD ‘s top 10 games for December...

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25 weeks ago

Electronic Arts Earnings Preview: Strong Portfolio To Support Digital Growth

Jan 28 2014, 7:20am CST | by


Electronic Arts is expected to announce earnings for the third fiscal quarter of 2013 on Tuesday, January 28. The video game maker had three titles on the list of NPD ‘s top 10 games for December in the U.S. The company could make long-term gains from strong holiday sales of the next generation Sony and Microsoft consoles. Despite glitches reported by gamers, EA’s first person shooter game, Battlefield 4, was the second highest selling game during the holiday month, while sports-based titles Madden NFL 25 and FIFA 14 came in fourth and ninth places, respectively./>

The research firm also reported that software sales fell 17% through the holiday season, but that shouldn’t deter EA as it has been able to maintain growth in a cyclically low industry through the digital domain (NPD figures do not include digital sales). Digital streams like extra-downloadable content, full game downloads, in-game advertising and mobile and tablet games accounted for 65% of EA’s GAAP revenue in the September quarter, up 11% over the prior year. Growth in these streams allowed the company to beat its own revenue and EPS guidance for the second fiscal quarter.

EA’s stock has been on a roller-coaster ride over the last two months. The stock plummeted after the company admitted there were problems with Battlefield 4, but has since recovered on growth prospects for the highly anticipated Titanfall title, which is expected to be released in the coming months. Our $28 price estimate for Electronic Arts’ stock implies a premium of 10% to the current market price.

See our complete analysis of Electronic Arts stock here

PR Issues

Electronic Arts has struggled with public relations; it was named by Consumerist as the Worst Company in America in each of the last two years. This image has not been helped by events over the last two months. EA faces a class action lawsuit regarding materially false and misleading statements issued by the company and has received criticism over its online marketing practices. Vice President Jeff Brown, who handled Public Relations, recently left EA after the Battlefield 4 fiasco.

However, we believe that these events will not have a material impact on EA’s financial results. The company has shown strong growth in the digital domain, improving margins and efficiency, and has a strong portfolio of games. Its exclusive licensing agreements with NFL and FIFA allow it to maintain a near-monopoly in the sports games domain. American football based game NFL is one of the most popular games in the U.S. and was named the third-best selling game of 2013 in the country by NPD. FIFA is more popular outside the U.S.; the soccer-based game was the fourth highest selling game in the world last year, accounting for 4% of the units sold worldwide.

FIFA is also a big contributor to digital sales, with FIFA Online 3 driving a 35% increase in DLC revenues last quarter. Digital net revenue from the FIFA franchise in the first half of fiscal 2014 was up 25% over the previous year. The FIFA World Cup is scheduled to take place in Brazil this year, with over 500,000 fans from all over the world expected to attend the event. Sales of the annual FIFA franchise went up 25% after the last world cup in 2010. We expect a similar trend this time, with additional gains from the DLC stream.

Digital growth should also allow for margin expansion. The cost of revenue for physical products sold is about 50% of net revenue while the cost of revenue for online and digital services is just 30%. EA’s gross margin improved from 60.1% in the second quarter of fiscal 2012 to 61.7% in 2013. Management expects to generate over 40% of fiscal year revenues from digital streams. Going forward, we expect margins to increase to about 68% over the long term as digital contribution increases further.

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Source: Forbes Business

 
Update
10

6 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

Cambodia's Famous Battambang Circus
KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the ...
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Update
9

6 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

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KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

6 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

Federal Aviation Administration Bans All US Flights To Israel
KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Rakyat t ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hish ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

6 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

INDIA-CHINA-DIPLOMACY-TRADE
PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ i ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

6 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

Government Weekly Cabinet Meeting
KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

6 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

Iskandar Johor Open - Previews
JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allo ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

EurAsia Cup presented by DRB-HICOM - Day One
PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaa ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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