Electronic Arts Inc. (ERTS), or EA as it is popularly known, will enthrall gaming enthusiasts with its latest games in Gamescom 2011.
The event that is held in Cologne, Germany, will have 350 gaming stations where gamers can experience the thrill of EA’s upcoming as well as some of the released blockbuster games. Some of the games that would be put to play are FIFA 12, Battlefield3, STAR WARS: The Old Republic and Need for Speed The Run. Also, games like The Sims Social, the game for social networking site Facebook, will be on display. Additionally, gamers will get a live demonstration of the game The Secret World.
EA has a strong product pipeline for fiscal 2012 and beyond, which will be instrumental in providing growth going forward. We believe that the high quality titles, impressive product line, increasing exposure to online and social games and diversification of the portfolio guarantees market share gains over the long term.
In addition, EA is trying to build a position in the emerging digital and social network market. With the increasing adoption of smartphones and portable devices, EA intends to develop its digital distribution business. EA launched Origin, its first online service to sell its downloadable titles directly to customers.
EA’s initiatives to gain traction in the social networking market got a major boost when it partnered with Google+, a social networking platform from Google Inc. (GOOG). EA will be providing Dragon Age Legends, a game developed by Bioware, to Google+ Circles and Hangouts. Google had confirmed that initially it will share 95% of the revenue from virtual goods sold to developers and keep only 5% for itself. This would be incrementally beneficial for EA in terms of generating revenues.
However, the gaming industry is reeling under pressure as is evident from the monthly sales reviews. For July 2011, the gaming industry shrunk 26.0% from the comparable quarter in the previous year. It was the sharpest fall since October 2006.
The major factors that resulted in the decline were the reduction in new title releases and lower sales. Adding to the woes was the uncertainty about the economy and the disappointing growth in the jobs market that ultimately affected consumer sentiments.
Additionally, interest expense will weigh on the company due to the issuance of debt, which along with competition from Activision Blizzard Inc. (ATVI) and Take-Two Interactive Software Inc. (TTWO) will be headwinds going forward.
We have a Neutral recommendation on Electronic Arts over the long term (for the next 6 to 12 months). Currently, Electronic Arts has a Zacks #2 Rank, which implies a Buy rating in the short term.
ACTIVISION BLZD (ATVI): Free Stock Analysis Report
ELECTR ARTS INC (ERTS): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
TAKE-TWO INTER (TTWO): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment