The gaming market has been exponentially increasing as more and more gamers are now getting addicted. Various companies are eyeing this growth market to reap the benefit. The gaming segment is broadly divided into mobile games, console games and PC games. The console gaming market may be performing fairly better, but the future seems to be a market for mobile games played on various handheld devices (Smartphones, Tablets, Net books). The mobile game market is anticipated to grow from $10 billion in 2013 to $29 billion by 2018 signifying a 30% growth from 2013 to 2018.
The mobile game market was previously anticipated as $17 billion but with the growth in the market of handheld devices, analysts now anticipate a much bigger market in mobile games. Electronic Arts (EA, Financial) is a renowned gaming publisher that has been focused in the gaming market and all the growth segment of this market. The stocks for this company are being currently traded at the higher slab of 52 weeks high-low, but I still feel it can reach new heights.
Financial metrics of the quarter
The company recently released its first quarter earnings and results were growth oriented. Revenue was up 27.9% year over year to record $1,214 million as compared to $949 million in same quarter last year. The consolidated revenue growth was leveraged by strong performances of games like Ultimate Team services, NHL Hockey Ultimate Team, FIFA Ultimate Team, Madden Ultimate Team.
Revenue growth year over year
| Games | Growth % |
| NHL Hockey Ultimate Team | 50% |
| FIFA Ultimate Team growing | 80% |
| Madden Ultimate Team | 350% |
Non-GAAP income was $61 million as compared to net loss of $122 million in the same quarter last year. The phenomenal growth in the net income was mainly due to the increase in operating margins for the company and decrease in the operating expense down to $485 million from $522 million when compared with the same quarter last year. This also resulted in recording a mammoth growth of earning per share to record $0.19 as compared to loss of $0.4 in the same quarter last year.
Cash flow increased by $252 million as compared to same quarter last year. The company also recorded twelve month trailing(ttm) cash flow of $964, and is the highest ttm cash flow recorded in the history of the company.
Performance metrics of games
In the first quarter, the company recorded 13.6 billion online sessions with almost 2.4 billion hrs (mobile, console & PC) of time spent for the games published by the company. The statistic for the active players reached 140 million per month for the company. Over 53 million games were played on FIFA Ultimate Team World Cup mode.
The company received over 40 E3 awards was also awarded with best RPG. NHL®15, was awarded with best home sport games from the E3 while Dragon AgeTM Inquisition received over 20 awards from E3. The company continues to rank number one for PlayStation 4 and Xbox One console games arena.
Guidance
The strong growth of the company has enabled it to provide a higher guidance for the second quarter and complete fiscal 2015. The company has revised the net revenue for the fiscal 2015 to $4.1 billion and expects $1.15 billion in the second quarter. The company anticipates non-GAAP EPS of $0.5 for the second quarter and EPS of $1.85 for the fiscal 2015. The revised guidance is primarily based on the launch of Battlefieldâ„¢ Hardline and Dragon Age Inquisition. In the second quarter, non-GAAP gross margins are expected to be higher by 3%, to record 65.5% as compared to 62% in the second quarter last year.
Payouts
EA continues to be stringent in its share repurchase programs, as it repurchased 1.4 million shares in Q1 for $50 million. The company initially had initiated a $750 million Share Repurchase Program in May 2014.
Conclusion
The company reported a strong first quarter; EPS of the company has been recording growth on year over year comparison. The company is also very optimist with its revenue guidance; operating cost of the company is reducing and gross margins increasing; this can always have a positive impact on the bottom line and EPS. We also see that the gaming market is witnessing a strong growth with a very bright future and Electronics Arts growth momentum should continue. Inventors can always consider Electronic Arts in their portfolio for long term growth oriented returns. I would suggest a buy for this company.
