360° Coverage : Electronic Arts Earnings Preview: Strong Portfolio To Support...

2 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 in...

Filed under: news

 
 
 

37 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.

See More at Trefis | View Interactive S&P Capital IQ Analyses (Powered by Trefis)

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

Source: Forbes Business

 
Update
2

7 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (Ne ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

7 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the d ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Japanese firm to produce more drug for Ebola
Tokyo, Oct 20 (IANS) Japan's Fujifilm Holdings Corporation announced Monday that it will start production of the anti-influenza drug Avigan in preparation for a larger number of patients infected with the Ebola virus.
 
 
Algeria denies Ebola detection reports
Algiers, Oct 20 (IANS) Algeria Monday denied reports of detection of Ebola virus cases in its territory, media reported.
 
 
Repeated viewing of violence and sex 'desensitises' parents
Washington, Oct 20 (IANS) In a stunning report, researchers have revealed that when it comes to sex and violence, the more parents watch TV shows or movies with explicit scenes, the less they care about what their kids can watch.
 
 
Nigeria declared free of Ebola
London, Oct 20 (IANS) The World Health Organisation (WHO) Monday officially declared Nigeria free of the Ebola virus disease after six weeks with no new cases.
 
 
 

Latest from the Network

1,074 new dengue cases in Chinese province
Beijing, Oct 18 (IANS) China's Guangdong province has reported 1,047 new cases of dengue fever, health authorities said Saturday. Six people have already died in Guangdong -- five in Guangzhou and one in adjacent...
Read more on Business Balla
 
Blake Lively 'always' wanted to be mum
Blake Lively has ''always'' wanted to be a mother. The 27-year-old actress is expecting her first child with husband Ryan Reynolds and she admits she's been dreaming of this moment since she was a youngster. Speaking...
Read more on Celebrity Balla
 
Kris Jenner 'torn apart' by Bruce's new relationship
Kris Jenner feels ''torn apart and angry'' that Bruce Jenner is dating her former assistant. The 58-year-old matriarch split from the 64-year-old Olympic gold medalist last October following 22-years of marriage but is...
Read more on Celebrity Balla
 
Cheryl Fernandez-Versini won't move to France
Cheryl Fernandez-Versini doesn't want to move to her husband's home country of France. The 'X Factor' judge, 31, who comes from Newcastle, is adamant she won't be relocating any time soon to suit her new spouse Jean-...
Read more on Celebrity Balla
 
Lance Bass sets wedding date
Lance Bass has set a date for his wedding. The former *NSYNC singer and his partner Michael Turchin, who have been dating for two-and-a-half years, are to tie the knot on December 20, 2014, a representative for the...
Read more on Celebrity Balla
 
Nepal avalanche toll reaches 39
Kathmandu, Oct 18 (IANS) At least 39 climbers died while hiking on a key Nepali route after it was hit by a major snowstorm and avalanches earlier this week, BBC reported Saturday citing officials. Over 350 stranded...
Read more on Politics Balla
 
Jake Gyllenhaal says society is complicit in 'nightcrawling'
Jake Gyllenhaal says almost everybody in society ought to relate to his new movie 'Nightcrawlers'. The eagerly-awaited film concerns those people who monitor police scanners and then race to crime scenes to film eye-...
Read more on Movie Balla
 
India eves look for first win in AFC U-16 qualifiers
Dhaka, Oct 18 (IANS) India will hope to register their first win of the 2015 Asian Football Confederation (AFC) Under-16 Women's Championship qualifiers when they take on hosts Bangladesh in a crucial encounter at the...
Read more on Sport Balla
 
Moyes mulling return to management
London, Oct 18 (IANS) Former Manchester United manager David Moyes said that he is ready to revive his managerial career six months after being sacked by the 'Red Devils'. "I am ready to return. I have enjoyed the...
Read more on Sport Balla
 
Ebola fears loom over Ghana hosting AFCON
Accra (Ghana), Oct 18 (IANS) The Ghana Medical Association (GMA) cautioned the government Saturday against hosting the 2015 African Cup of Nations (AFCON), despite a request by the Confederation of African Football (...
Read more on Sport Balla