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Electronic Arts (EA) Pins Hopes on Star Wars Battlefront

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Electronic ArtsEA released its much anticipated video game Star Wars Battlefront yesterday. The game is available in North America, Europe and Asia across PS4, Xbox One and "all-in-one games and entertainment system from Microsoft and Origin for PC."

Star Wars Battlefront has been developed by Swedish game developer Dice. Battlefront will help players to "live out the battles between the Rebellion and the Empire in the time period of the original Star Wars trilogy."

It is a multiplayer game that can engage over 40 players at a time while "delivering a variety of Star Wars experiences that fans have been clamoring for. Drive speeder bikes at breakneck speeds through Endor, crush Rebel scum in an AT-ST or AT-AT, take to the skies in the Millennium Falcon or even become the ultimate boss of a multiplayer match as one of the Star Wars universe's most iconic Heroes or Villains - Boba Fett, Leia Organa, Luke Skywalker, Darth Vader and more".

Battlefront was touted as one of the biggest video game releases of the year. The hysteria surrounding Star Wars: The Force Awakens added to the already hyped release. Electronic Arts at its second quarter fiscal 2016 earnings conference call had said that it now expects to sell 13 million copies of Battlefront by Mar 2016, up from the earlier projection of 9 to 10 million units.

Battlefront's early reviews are mostly mixed with "Metarcritic rating it 73 out of 100 based on 13 critics who reviewed the Xbox One version and 78 out of 100 for the PS4 version based on reviews by 11 critics." Though the game is visually stunning, the "lack of options and limited gameplay" are big disappointments. Analysts however are confident that the title will sell over 13 million copies given the holiday season and the hysteria surrounding the release of Force Awakens in December, the first Star Wars movie in a decade.

However, some analysts point out that stiff competition from an overcrowded release schedule in the holiday period is a major concern. With other anticipated titles like Fallout 4 and Call of Duty: Black Ops 3 already released, it remains to be seen how this game performs.

Released last week, Activision Blizzard, Inc.'s ATVI Black Ops 3 garnered $550 million, globally, in its opening weekend, making it the biggest entertainment debut across movies, books, and music albums launched so far in 2015. Also, Bethesda Softworks' Fallout 4 has opened to mostly good reviews, which should help in boosting its sales, going forward. Additionally, higher consumer spending on new consoles may cannibalize software sales in the near term.

Electronic Arts had struck a 10-year licensing deal with The Walt Disney Company DIS in 2013 for the Battlefront series. The deal includes the first two trilogies along with the yet to be released seventh instalment, The Force Awakens.

We believe that Battlefront has room to grow given that Disney has a very ambitious plan to revive the Star Wars franchise. Disney has already announced two more sequels following Force Awakens and three standalone movies to be released in the next few years. Disney's unparalleled creative and marketing abilities ensure that franchise revival will generate a resounding response from the audience and that should benefit all its associated merchandise. Fully aware of this, Electronic Arts has already announced sequels to Battlefront.

Battlefront is not just the potential driving factor at Electronic Arts. Analysts observe that after struggling with deteriorating sales and profitability, the company has been focusing on quality control and aims to maintain a lower number of game titles (10 in fiscal 2015 compared with 11 in fiscal 2014 and 30 in fiscal 2011). While the lower number of titles could affect the company's competitive position, the improved quality will support higher revenues and increase margins over the long run.

Moreover, a portfolio of well known video game franchises like Madden Football, FIFA NBA Live, Battlefield and Need for Speed should continue to drive the top line going forward.

The strategy seems to have been benefitting Electronic Arts. The company recently upgraded its fiscal 2016 outlook. For fiscal 2016, EA expects to generate non-GAAP revenues of approximately $4.500 billion, up from the earlier projection of $4.450 billion. Non-GAAP earnings are expected to be $3.00 per share, higher than the previous forecast of $2.85.

Shares of this Zacks Rank #1 (Strong Buy) stock have soared over 45% so far in the year.

Another stock worth considering in the same space is Take-Two Interactive Software Inc. TTWO , sporting the same rank as Electronic Arts.

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ACTIVISION BLZD (ATVI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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