Electronic Arts is riding high on the stock market today after reporting its fiscal Q2 earnings.
The publisher blew away Wall Street’s expectations in Q2, and now most analysts expect the company will continue to grow over the next several years. This has EA’s stock trading up around 3.7 percent today to $38.87 — although it was briefly above $40 a share for the first time since September 2008 at one point today. The company generated 73 cents per share in earnings and revenues of $1.22 billion in Q2 largely due to strong performance from EA Sports releases, mobile games, and The Sims 4.
The company also outlined a look at its release schedule moving forward. It confirmed that Battlefield: Hardline is due out in March, which is the end of EA’s fiscal year. Star Wars: Battlefront, meanwhile, debuts during 2015’s holiday season, which is Q3 of EA’s fiscal 2016. And Battlefield 5 doesn’t debut until holiday 2016, which is fiscal 2017 for the publisher.
With those tentpoles spread across the next several big release periods, analysts expect that EA’s best performance is still ahead of it.
“Despite the strong performance in shares of EA this year, we believe the stock has further room to run,” Sterne Agee analyst Arvind Bhatia said.
Bhatia thinks that EA’s stock price could reach $44 per share, and he’s giving it a “buy” rating. He goes on to explain that the spacing of EA’s big shooter games makes sense.
“As we expected, EA management announced plans to launch Battlefield 5 in the holiday quarter of calendar year 2016 to avoid any potential fatigue from two Battlefield titles in the same year,” he said. “EA has increased confidence in the potential success of [Star Wars: Battlefront], which also helps to explain their decision to delay Battlefield 5.”
Bhatia says this schedule will help EA maximize its earnings from Battlefield without introducing franchise fatigue. He also explains that EA could maintain consistent revenue and earnings due to having a big shooter debuting in each fiscal year.
EA’s Xbox One and PlayStation 4 strategy also has Wedbush analyst Michael Pachter bullish on the publisher.
“EA’s strong presence on the next-gen consoles positions the company to thrive in 2015 and beyond,” he wrote in a note to investors. “EA has two major releases over the balance of the fiscal year and has franchises such as FIFA and Madden that should benefit from strong next-gen console sales this holiday.”
Pachter expects both the PS4 and Xbox One to continue selling well through the holidays and beyond, and that is good news for EA.
Finally, EA is figuring out mobile, and Eilers Research analyst Adam Krejcik emphasized this in his report to investors.
“EA generated revenues of $115 million in Q2, which [is] 9 percent of its total revenues,” he wrote. “The freemium component was up 35 percent year-over-year, and [EA] disclosed its mobile business had more than 155 million monthly active players versus 140 million in fiscal Q1 2015 and 130 million at the end of fiscal year 2014.”
Those last two metrics are the most important for EA. The company has recently shifted from a premium-priced model, where players paid for mobile Madden and FIFA upfront, to free-to-play. That business is growing for the publisher both in terms of revenues and engagement.
If EA does deliver on what these analysts expect, it will represent a continued growth for the publisher that started in early 2013 after former chief executive officer John Riccitiello stepped down in March of that year. Since then, the company has downsized, which has helped it improve its profit margins. It has focused on delivering better results from its biggest games while also improving its mobile business.
Under new chief executive Andrew Wilson, the company has seemingly put all the pieces in place. As long as it keeps releasing high-quality games that sell well, it’s likely that it will experience growth as many are predicting.
The company’s next big release is the fantasy role-playing game Dragon Age: Inquisition from developer BioWare. It is due out Nov. 18, and it has the chance to sell well throughout the holidays depending on the critical and fan response.