Sports Titles To Be Major Growth Drivers In Q1 2016 Earnings For Electronic Arts – Forbes

The American video game developer, Electronic Arts , is slated to release its first quarter fiscal 2016 earnings results on July 30. The company has been beating the market estimates for the last couple of years, driven by the success of its sports titles. EA’s stock has more than doubled over the last 12 months. According to Wall Street estimates, EA is expected to report an EPS of $0.02 in Q1 2016.

Electronic Arts finished the fiscal 2015 with a strong statement, as it posted a 5% year-over-year (y-o-y) jump in the Q4 revenues, with a significant 25% increase y-o-y in the digital revenues, which accounted for more than half of the total revenues. Nonetheless, the highlight of the company’s fiscal 2015 report was the company’s non-GAAP operating margins, which were 500 basis points above the guidance at 25% given at the start of the year. The company’s popular core franchises, such as FIFA, Madden NFL, The Sims,andBattlefield, and their respective live services, attracted the gamers and provided a boost to the revenue growth. These games kept the momentum alive in the June-ended quarter as well, and might pick up pace in the latter half of the year.

Our $65 price estimate for Electronic Arts’ stock is 8% below the current market price.

See our complete analysis of Electronic Arts stock here

FIFA and Madden NFL: Still Leaders

EA has been riding high on title sales, with sports titles leading the race. EA’s dependence on its sports franchises, Madden NFL and FIFA, has increased for a variety of reasons over the last few years. Both titles are the most popular and most widely played sports games in their respective regions. According to VGChartz, FIFA 15 sold roughly 16.86 million units as of June 27, 2015, with Europe accounting for nearly 63% of the total sales. FIFA sales are usually high in those years when there is a major soccer tournament, such as the World Cup or Euro Cup. Considering, there is no major soccer tournament this year, the growth in FIFA sales will be lower than FIFA sales in 2014, which witnessed the FIFA World Cup. Trefis estimates the number of FIFA units sold to increase 6% y-o-y, compared to 27% last year. Nonetheless, the soccer simulator will still remain the major cash minting title for the company, as its popularity is growing among the sports fans.

At the 2015 Electronic Entertainment Expo (E3), held at the Los Angeles Convention Center in Los Angeles, California from June 16 to June 18, EA showcased the trailer and in-game details about the upcoming FIFA 16, which will have the women’s teams for the first time in the history of the franchise. With demand for FIFA titles growing every year, we can expect FIFA 16 to further boost the revenue growth.

On the other hand, gamers are showing positive response to Madden NFL in the North America region. The title has sold close to 6 million units as of June 27, 2015, with over 85% of the sales in North America. By the end of fiscal 2015, the game-play hours for the title rose nearly 30% y-o-y. On the other hand, the Madden NFL mobile game continues to attract more players, as the game-play for the mobile rose 25% y-o-y.

EA is scheduled to release this year’s edition of the title, Madden NFL 16, on August 25, 2015, whose anticipation is already running high among the American football fans.