Electronic Arts Inc. (NASDAQ:EA) is a household name among anyone who loves online gaming or owns a game system.
And that’s pretty impressive given the fact that it pales in size to monster competitors Microsoft Corporation (NASDAQ:MSFT) and Walt Disney Co (NYSE:DIS) and is even smaller — by market cap — than pure play gaming rival Activision Blizzard, Inc. (NASDAQ: ATVI).
But what it lacks in stock market size, it easily makes up for in the gaming community.
EA Sports division has the licenses for major sports leagues like the NFL, NHL, NBA, FIFA, UFC, NCAA and PGA. Electronic Arts also just inked a deal with English Premier League soccer team Manchester United. In September, EA will launch FIFA 17 and NHL 17.
Its gaming division has two huge multi-player games — Titanfall and Battlefield — with more than 10 million downloads each. And Titanfall 2 will launch in October.
EA also holds the license for the Star Wars franchise and its new game Star Wars Battlefront has 6.6 million players through the second quarter of the year.
These are massive franchises to manage. And now that summer is over and people are back to work and back to school, new (and old) gaming titles will be increasing in popularity.
More Growth Is Inevitable for EA Stock
The point is, for all the strength Electronic Arts has shown up to now, its growth is likely to expand significantly.
EA continues to blow past earnings estimates and mobile is now a major growth component in its business moving forward. And in those games, advertisers also buy space to sell to gamers while they’re online.
Quarterly year-over-year growth is averaging 11% for the last 3 quarters, with mobile, advertising and full game downloads revenue leading the way. Mobile has seen 23% growth in its latest quarter.
And we aren’t even factoring in the holiday season, which is one of the biggest quarters for gaming companies.
Mobile is a very new revenue source and it’s becoming a bigger revenue draw than traditional game downloads. We are entering a new gaming world where, like everything else before it, players can play untethered by ethernet cords.
According to Morningstar, Electronic Arts’ price-to-earnings ratio is lower than the industry average (23 vs 34), yet its revenue growth is almost 10x the industry average. And its margins are much better than average.
All this adds up to a very strong company that is selling at a very good price. And it has outperformed its competitors year-to-date; EA stock is up nearly 20% compare to ATVI’s 10% and MSFT’s 3%.
This performance also shows that the pure plays in this sector are the ones with the most traction right now, and this trend should continue for a very long time.
When you have the franchises that EA has, there’s little doubt that it will be a dominant player in the space as long as there are gamers and devices.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
