Sometimes investing is really simple. The current case for Electronic Arts (NASDAQ:EA) is very simple. The company will be releasing the latest version of its popular, and profitable, sports game, Madden 21. And that makes now a great time to buy EA stock.
Like most gaming-related investments, EA stock has rallied impressively from the market selloff in March. The stock is up over 59% since that time. Much of that rally occurred due to the anticipated increase in users due to the mitigation efforts brought on by the novel coronavirus.
They’ll Complain and Argue. But They’ll Still Buy.
I know millions of Americans could care less about the absence of live sports. However, over 130 million consumers can’t be wrong. That’s how many copies of Madden games Electronic Arts said it sold before the release of Madden 20.
One reason for this is the way the company manages to keep the franchise relevant. For example, Madden 20 added a Face of the Franchise mode which let players create their own player. It’s a feature that attracts new users and gives existing users a reason to upgrade to the latest version.
At various times of the day during this pandemic, I hear my son playing Madden against an online opponent. It’s given me an education in how the players receive their ratings. And that is apparently a big deal to fans of the game as well as the players in the game.
Like NBA 2K from Take-Two Interactive (NASDAQ:TTWO), Madden is a game that attracts the attention of current and retired NFL players. These players love to take to social media to debate what they perceive as a slight in their rating. It also draws the attention of broadcast networks like ESPN which devoted a prime-time segment to breaking down the latest Madden ratings.
And that’s the point. Part of the appeal of the game is that it creates a legion of armchair quarterbacks who actually debate this. They swear the game is rigged. And they’ll buy the game anyway.
New Consoles Will Give EA New Users
Mordor Intelligence, expects the global gaming industry to grow at a compound annual growth rate (CAGR) of approximately 9.2% through 2025. A reason for this is that gaming stocks like Electronic Arts get a gift of sorts from video game console makers. They release new consoles and EA gets new users. That’s the case this fall as both Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT) introduce new versions of their PlayStation and Xbox respectively.
The Bottom Line on EA Stock
As disruptive of an event as the novel coronavirus has been, investors know that all good things come to an end. EA stock offers investors multiple bites at the apple. First, the release of Madden 21 will be an instant boost in revenue among existing members of the Madden family. And second, the release of new gaming consoles in the fourth quarter is a likely opportunity for Electronic Arts to welcome some new users.
Skeptics may say EA stock is already pricing in this growth. They’ll also say that video game stocks are bound to come down off the high they received from having millions of people staying at home.
However I agree with Luke Lango’s bullish view on EA stock. Unlike some stocks that are trading on hope, EA stock has these catalysts in place. With that said the rest of 2020 looks very good for Electronic Arts.
The company is releasing earnings on or around July 30. Consumers are beginning to pre-order Madden 21. But you can own EA stock today. I suggest you do that.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for Investor Place since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
