Electronic Arts Inc. (NasdaqGS:EA - News) has released the demo version of its much anticipated Mass Effect 3, which can be played on Microsoft Corp.’s (NasdaqGS:MSFT - News) Xbox 360 gaming system, Sony Corp’s (NYSE:SNE - News) PlayStation 3 and PCs. Touted the most-awaited game of 2012, Mass Effect 3 will help gamers to launch an all-out attack on an ancient alien race, Reapers, to regain control on Earth as Commander Shepard. The full version of the game is scheduled to release on March 6, 2012.
The demo version of the game can be played in single as well as multi-player modes, allowing gamers to enjoy three different experiences, namely Action, Story and Role Playing, with each having their unique and intriguing gameplay.
The Mass Effect series has been one of the most successful franchises for the company with over 7 million copies being sold since release. The upcoming release of Mass Effect 3 is going to be a positive influence on the top line of the company for the current and forthcoming quarters.
EA’s last reported quarter was impressive, primarily driven by robust digital revenues and strong performances from Battlefield 3 Star Wars: The Old Republic (which were launched during the holiday season) and FIFA 12.
Moreover, EA’s shift of business mix towards the digital format bodes well with the current trend in the video gaming industry’s massive transition from physical to digital gaming. Digital online games -- including used games, rentals, mobile games and social games -- have gained tremendous popularity in recent times.
EA’s pipeline consists of high-quality titles and with increasing online exposure, social games guarantee market share gains over the long term. However, the gloomy macro-economic environment, increasing competition and weak video game sales results over the last 12 months, compel us to remain cautious in the near term. Competition from Activision Blizzard Inc. (NasdaqGS:ATVI - News), Zynga Inc. (NasdaqGS:ZNGA - News) and new entrant International Game Technology (NYSE:IGT - News) may act as the another headwind going forward.
Moreover, the whole video game industry has been plagued by weak consumer spending and troubled economic conditions. However, analysts are optimistic about February and March sales, expecting new game releases such as UFC, Resident Evil, Mass Effect 3 and Kingdoms of Amalur: Reckoning to save the day.
We have a Neutral recommendation on Electronic Arts over the long term (for the next 6 to 12 months). Currently, Electronic Arts has a Zacks #3 Rank, which implies a Hold rating in the short term.
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