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EA Launches Titles for Next-Gen Consoles

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Gaming Company Electronic Arts Inc. (EA) recently announced the availability of five titles for next-generation consoles starting today. The new version of the games for Sony’s (SNE) PlayStation 4 and Microsoft’s (MSFT) Xbox One will now be available on Origin.com and at retail stores.

The titles which feature in this line-up include Battlefield 4, FIFA 14, Madden NFL 25 and Need for Speed Rivals for PlayStation 4, with NBA LIVE 14 joining the league next week. These titles will be available for Xbox One from Nov 22 onwards.

We believe this is an ideal time to launch these next-gen console versions, in order to attract the gaming enthusiasts. We believe this will be a win – win situation for both the game development companies and the console manufacturers as one influences the business of the other.

As per the latest gaming industry report published by Gartner in Oct, 2013, the research firm stated that the worldwide video game marketplace (including video game console hardware and software, online, mobile and PC games) are expected to reach $93.0 billion in 2013, up from $79.0 billion in 2012.

The growth will be primarily driven by strong mobile gaming numbers and increase in video game console and software sales. Moreover, the market is forecast to reach $111.0 billion by the end of 2015.

Moreover, the Gartner report also states that new launches from traditional console manufacturers such as Sony and Microsoft and increase in demand for these new consoles will help to resume growth during 2014. Sales of existing console hardware are thus forecast to increase from $15.9 billion recently to $22.7 billion in 2015.

This optimistic outlook is also reflected in the third quarter guidance provided by the company. EA expects to generate third quarter of fiscal 2014 non-GAAP revenues of approximately $1.65 billion. The company expects non-GAAP earnings to be $1.22 per share. We believe this is an optimistic outlook, given the fact PC gaming is going to take a backseat in the near term.

We believe that EA’s strong digital portfolio and continuing growth in the free-to-play and online segment will drive top-line growth, going forward. Additionally, the company is gaining traction in the tablet and smartphone market, though games released on Apple’s iOS and Google’s platforms are commendable.

However, we believe that the company faces a number of headwinds that include significant competition from other game makers such as Activision (ATVI).

Currently, EA has a Zacks Rank #3 (Hold).

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