Should You Invest in Electronic Arts?

PHOTO CREDIT: Electronic Arts

OVERVIEW

Electronic Arts Incorporation is a company based in the United States. The company designs, programs, manufactures, and distributes video games around the world. The company manufactures and distributes games like Need for Speed, Fifa, Madden, NBA Live, Apex Legends, and many others. The company was founded in 1982.

Why You Should?

  1. The COVID-19 Pandemic has caused a spike in the demand and usage for video games. Electronic Arts has seen strong results during the past couple of quarters as people stayed at home and spent money to entertain themselves with video games. This will benefit the company’s future growth and will also benefit its investors.
  2. Electronic Arts has a strong mobile presence. The company produces video games for PC and other gaming hardware like Playstation and Xbox. The company also produces games for tablets and other mobile devices, something which has benefited the company’s past results. These mobile games will benefit the company’s future growth in the video game industry.
  3. Electronic Arts designs, manufactures, and distributes extremely popular games around the world. Some of these include Apex Legends, Need for Speed, Madden, and one of the most popular games in the world, FIFA. These games have driven the company’s financial results and growth in the video game industry. These results have also benefited investors.
  4. Electronic Arts report their strongest numbers during the holiday quarter. This year, Electronic Arts might have a record quarter as consumers purchase video games to give away as gifts to others. This strong holiday season will benefit both the company and its investors.
  5. The company has seen rising revenues and profits over the past couple of financial years due to the reasons mentioned above. This will allow the company to develop newer video games and further grow in the video game industry. This will also benefit the company’s investors. In the financial year of 2020, the company reported revenues of around 5.54 billion and profits of around 3.04 billion. Both of these metrics are higher than what the company reported in the financial year of 2019 when they had revenues of around 4.95 billion and profits of around 1 billion.
PHOTO CREDIT: Yahoo Finance

Why You Should Not?

  1. Though Electronic Arts has a large presence in the video game industry, it still faces tough competition. Traditional video game manufacturers like Take-Two Interactive and Activision Blizzard offer good competition to Electronic Arts. Companies like Apple are also expanding into the gaming industry with Apple Arcade. This might hurt the company’s future results.
  2. Earlier this year, EPIC Games had an issue with Apple and Google’s 30% App Store royalty fee, something that hurt its top and bottom line. Apple both and Google took exception to what EPIC games was doing, and its apps were removed from the tech company's app store. If something similar happens to EA, then it will also hurt EA’s operating results.

MY OPINION

In my opinion, I think that Electronic Arts is a strong investment option during these tough times due to the rise of demand and usage due to the COVID-19 Pandemic, its strong mobile presence, strong game brands, a possibility of a strong holiday season, and rising revenues and profits. However, competition and uncertainty on how Apple and Google will treat the company will hurt the company.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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