Electronic Arts (NASDAQ:EA) is scheduled to report fiscal 2022 third-quarter earnings on Feb. 1. The video game developer is having great success as hit titles resonate with gamers worldwide.
Of course, it also helps that billions of people are spending more time at home since the onset of the pandemic. Investors will likely focus on the impact new hit titles had on revenue and profits in Q3.
Image source: Getty Images.
Hit titles are driving record sales for Electronic Arts
Interestingly, its most recently completed quarter ended Sept. 30 was the best-ever Q2 in the company's history. Total revenue increased to $1.8 billion from $1.1 billion in the same quarter the prior year. The outperformance was driven by success of the newest installment of its popular FIFA franchise and robust engagement in its live services segment.
"This was the strongest second quarter in the history of Electronic Arts, with more players around the world joining and engaging in our leading franchises, new launches, and live services," said Andrew Wilson, CEO of Electronic Arts.
The company's third quarter will consist of the launch of Battlefield 2042, another one of its hit titles, with 7.7 million players signaling an interest in the release. The better-than-expected customer response to these new titles has led management to raise the fiscal year 2022 revenue guidance twice already. That's impressive, considering it has been during economic reopening, when folks are not stuck at home as much as earlier in the pandemic.
Further, next-generation gaming consoles, which fuel demand for game sales, have been in scarce supply since launching. The company generates most of its revenue from live services, but those rely on an individual owning a device (PC, console, mobile) to play the game. And for Electronic Arts, revenue from players using consoles is the most prevalent, consisting of $1.2 billion of the company's $1.8 billion of revenue in Q2.
What this could mean for Electronic Arts investors
Analysts on Wall Street expect Electronic Arts to report revenue of $2.67 billion and earnings per share of $3.23. If it meets those projections, that would represent increases of 59.9% and 5.6%, respectively, from the year-ago period.
The company's excellent performance of late is no secret to the market. The stock is trading at its most expensive valuations in the past five years when measured by its price-to-earnings and price-to-free-cash-flow ratios. Shares also moved higher after the announcement of Microsoft's acquisition of rival Activision Blizzard.
The gaming industry is attracting more attention because of increasing consumer engagement and digital purchases. Indeed, analysts expect Electronic Arts to grow revenue 27% annually over the next five years (vs. 9.3% in the past five years). With its popular titles and excellent performance, Electronic Arts is one stock to keep an eye on now.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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January 26, 2022 at 11:30PM
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