Why Investors Are Optimistic about Electronic Arts



Revenues have increased YoY since fiscal 2013

As seen in the chart below, Electronic Arts (EA) has seen YoY (year-over-year) revenue growth in each of the last four fiscal years. Revenues for Electronic Arts rose from $3.8 billion in fiscal 2013 to $4.0 billion in fiscal 2014, $4.3 billion in fiscal 2015, $4.6 billion in fiscal 2016, and almost $5.0 billion in fiscal 2017.

We have seen that analysts expect EA’s revenues to be close to $6.0 billion by fiscal 2020. Its EBITDA[1. earnings before interest, tax, depreciation, and amortization] could almost double from $1.3 billion in fiscal 2015 to $2.3 billion in fiscal 2016. Its operating profit is also expected to rise from $1.1 billion to $2.2 billion during the same period.

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Four of the top ten sellers were from EA

In the previous part of this series, we saw that EA could sell ~882,000 units of the much-awaited Star Wars Battlefront II in November 2017 compared to earlier estimates of ~1.7 million units. 

However, EA still accounted for four of the top ten sellers in November according to gaming research firm NPD. Comparatively, peer Activision Blizzard (ATVI) had two games in the top ten.

Analysts expect EA to bounce back from its recent Star Wars Battlefront II debacle. The company’s strong gaming franchises, as well as the continuous rise in digital and mobile gaming, could drive revenues over the next few years.


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