Video game developer and publisher, Electronic Arts Inc. (ERTS), popularly known as EA, recently launched its latest game NHL 12 in retail stores across North America. NHL 12 is available exclusively on Sony Corp.’s (SNE) PlayStation 3 and Microsoft Corp.’s (MSFT) Xbox 360.
NHL 12 features more than 300 game-play movements based on Anticipation AI, Dynamic Goalies and the Full Contact Physics Engine. Anticipation AI helps players to read match situations and plan movements accordingly. With Dynamic Goalies, goalkeepers go live for the first time in NHL’s history, while the Full Contact Physics Engine enhances the tackling prowess in the NHL field.
Further,NHL 12 will allow gamers to play with nine former NHL greats including Wayne Gretzky, Gordie Howe, and Mario Lemieux. NHL 12 contains a new game mode known as “Be A Legend”, which allows gamers to slip into the role of the real world greats.
Gamers can be a part of the Hockey Ultimate Team and can play EA Ultimate Hockey League (EAUHL) any time. EAUHL currently allows the Hockey Ultimate Team to play against another team online (as the team can be downloaded from EA servers), even when the other gamer is offline.
EA also announced that the NHL franchisee is a member of the EA SPORTS Season Ticket program. Season Ticket subscribers were provided a full digital access to NHL 12 three days before the retail launch.
We believe that the success of NHL franchise demonstrates EA’s continuous endeavor to produce quality products. EA delivered 15 titles rated 80 or above by Metacritic in fiscal 2011.
The new NHL game is expected to drive EA’s top-line sales going forward given its superior graphics and lack of competition. The only note-worthy competitor is 2K Sports, a division of Take Two Interactive Software Inc. (TTWO), NHL franchisee, which is only available on Nintendo’s Wii console and Apple Inc.’s (AAPL) iPad and iPod touch devices.
Moreover, EA has reduced its exposure to the declining packaged goods sector. EA is focused on developing promising intellectual properties (IP), which possess the ability to generate higher revenues and profits for the company. In order to achieve the target, the company has reduced the number of title releases to 22 for fiscal 2012 from 36 in 2011, 54 in 2010 and 67 in 2009.
Our Take
We believe EA has a strong product pipeline, which will drive top-line growth going forward. However, the gloomy macro environment in North America, increasing competition and weak video game results over the last 12 months compel us to remain on the sidelines.
We therefore have a Neutral recommendation on Electronic Arts over the long term (for the next 3 to 6 months). We expect some improvement going forward based on EA’s strong product pipeline. This is the reason for the Zacks #2 Rank, which implies a Buy rating in the short term.
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