Electronic Arts Inc. (EA) Stock Skyrockets After Surprise Results

Electronic Arts (NASDAQ:EA)

Electronic Arts Inc. , the video game maker that has produced best selling titles such as “Battlefield” and “FIFA”, saw share prices surge on the back of surprise quarterly performance. Shares were trading 6.8 percent up at $68.85 at the close of Tuesday’s trade. This follows the release of quarterly profit and revenue results that beat market consensus.

Electronic Arts Inc (NASDAQ:EA)

The EA stock was trading at $64.54 on Wednesday morning, down from a high of $69.15 on late Tuesday after-hours trade.

The shares were also up due to the success of the latest launches and the “Star Wars Battlefront” game. The game, which was unveiled last November, has so far sold at least 14 million copies for the year through March 31.

Electronic Arts also excited the market with new, though smaller game releases, in the fourth quarter. These releases include titles such as “EA Sports UFC 2”, a martial arts game; “Unravel”, and “Plants vs Zombies:Garden Warfare 2”.

Adjusted revenue rose 3 percent year-on-year to $924 million on the back of rising customer demand for its games. The company reported that revenues from its digital division surged 18.3 percent to contribute to 77 percent of its overall adjusted revenue.

Earnings per share excluding items stood at 50 cents per share in the quarter through March 31. This topped the market expectation of adjusted revenue of $888.8 million and earnings per share of 42 cents.

Electronic Arts Expects Losses in First Quarter

Nonetheless, Electronic Arts surprised the market by warning the market that it expects to post a loss and revenue that lags market consensus for the first quarter. This is mainly due to the fact that it expects to release only one game, “Mirror’s Edge Catalyst”, in the quarter.

The company expects to report an adjusted revenue of $640 million, coupled with a loss of 5 cents a share for the period. This trails analysts’ estimate of $738.5 million in revenue and a profit of 18 cents per share.

Still, the company is set for good tidings ahead. This is due to the fact that its trailer of “Battlefield 1” game, which includes battles fought in World War 1, has received roaring reviews. A trailer of the game launched last week has so far generated at least 1 million likes on YouTube. The games will be launched in the third quarter.

Electronic Arts has fared poorly in mobile gaming, a fast growing niche. Rivals in this gaming sub-category include Supercell Oy, WillowTree, Inc and Y Media Labs. The company noted that the number of people playing the free-to-download games on its stable have been increasing. It attributed this to lack of time on the users’ part to regularly open its apps.

Game publishers are increasingly turning their focus to mobile gaming, especially those that previously targeted PC and console gamers. Electronic Arts’ efforts to gain a foothold in this niche have paid off. The company boasts of having its mobile games leading download statistics on Alphabet Inc.’s and Apple Inc.s app stores globally.

Mobile gaming is the sector in video-game industry that has grown the fastest. The niche is expected to grow 37 percent in the years through 2020. Annual revenues are expected to climb to $48 billion in that year, research by M&A advisory firm Digi-Capital Inc. shows.

Monthly active users for the game “Madden NFL Mobile” grew 30 percent from the previous year. The company also reported that clients who had installed “Star Wars: Galaxy of Heroes” had increased. The average number of hours spent on each game per player was two hours in the fourth quarter, statistics showed.

The company’s finance honcho Blake Jorgensen wants players to spend more time playing games, which could lead to more revenues.

Mobile Gaming Market Witnesses Increased M&A Activity

The mobile gaming market is increasingly being characterized by mergers. In February, Activision Blizzard, Inc. forked out $5.9 billion to acquire King Digital Entertainment Plc. King Digital Entertainment is known for its wildly popular mobile game “Candy Crush Saga”.

Last week, Activision Blizzard stunned the market by releasing results that topped expectations, partly due to its King’s acquisition. Adjusted revenue grew 48 percent to 797 million. Digital content includes virtual goods, full games and expansion packs.

Digital revenues contributed to 55 percent of Electronic Arts Inc. ’s revenue. The adjusted digital sales jumped 18 percent to $712 million from the previous year. EA’s so-called live services, which comprises “Ultimate Team” sports games, recorded revenue growth of 26 percent year-on-year. This growth is 33 percent if foreign exchange adjustments due to stronger dollar are factored in.

Meanwhile, Jorgensen revealed the company is devising its newest intellectual property set that will be released next year-FY 2017.

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