Electronic Arts’ [EA] share value has gained 18.85% for the reason that begin of the yr as lockdown noticed clients spending extra time on their online game consoles. October may proceed this run with the discharge of Star Wars Squadrons and FIFA 2021. For some analysts, the important thing to EA’s success is its franchises, and extra particularly its sports activities franchises. With the video video games trade larger than ever, we have a look at how the likes of FIFA and Madden energy EA’s share value positive aspects.
Fund managers wager on EA’s sports activities franchises
Mick Dillon and Bertie Thomson, who run Brown Advisory’s $1.3bn World Leaders Technique Fund, suppose the gaming large’s enterprise mannequin makes EA’s share value properly value contemplating.
Based on the fund managers, EA’s share value stands to realize most from its sports activities franchises, which account for 70% of the corporate’s free-flow. These embrace Madden NFL, which is the best-selling sports activities franchise within the US, and supreme combating simulation UFC. Yearly, a brand new iteration is launched to keen followers, guaranteeing a daily supply of earnings. Dillon credit this for the model’s “annuity model consumption and excessive ranges of engagement”.
FIFA is one in every of EA’s greatest franchises. The most recent FIFA 2021 clocked up 2.3 million gamers on EA Play within the first few days of launch earlier this month, whereas final yr’s version has greater than 25 million distinctive gamers. With the following technology of gaming prone to be dominated by e-sports and cloud gaming, having such precious franchises may see EA’s share value prosper within the longer-term.
“In soccer, EA has the premium content material — are you able to think about, in impact, a worldwide model of ESPN, Sky Sports activities and BT Sports activities within the online game world?” mentioned Thomson.
EA dominates August online game gross sales
August was a bumper month for online game gross sales within the US. Purchases got here in 37% increased in comparison with the identical interval final yr, with the newest iterations of EA’s Madden and UFC main the pack, in keeping with NPD Group knowledge
“Madden NFL 21 was the best-selling title of August, with double-digit share greenback gross sales development when in comparison with the discharge month of Madden NFL 20,” mentioned NPD analyst Mat Piscatella.
Not solely was Madden the best-seller for August, Madden is already the sixth greatest vendor this yr, whereas UFC 4 set a “launch month gross sales report for an Digital Arts-published UFC title,” Piscatella mentioned.
This continues a robust run for EA. Within the firm’s newest set of outcomes, gross sales had been up 22% in comparison with the identical interval final yr, totalling $25.9bn. For the 12 months to 30 June, internet bookings got here in at $5.98bn, a 17% year-over-year enhance.
What do the analysts consider EA’s share value?
The robust gross sales and venerable franchises have gotten analyst consideration. Wells Fargo raised their goal on EA’s share value to $150 in July, having initiated protection with an Equal-Weight ranking in June.
A bit extra optimistic is Jefferies analyst Alex Giaimo, who raised his goal on EA’s share value from $140 to $155, additionally in July. Berenberg go even additional, having elevated their value goal from $125 to $165 in August, citing the writer’s franchises as development drivers within the medium time period.
Alongside FIFA, the corporate additionally owns the gaming rights to the Star Wars, The Sims, Battlefield and Want for Velocity franchises. Every of those have built-in audiences who pays for the newest editions on a near-yearly foundation. Contemplating a analysis report from Newzoo reckons the online game market may hit $159.3bn this yr — almost 4 instances that of the US field workplace in 2019 — EA seems to be in a robust place.
Of the 29 analysts monitoring EA on CNN Cash, the inventory has a median $155 value goal. Hitting this could see a 16.76% upside on EA’s share value (as of 14 October’s shut).
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