Electronic Arts Signs Lionel Messi - Analyst Blog

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Electronic Arts Inc. ( ERTS ), popularly known as EA, has signed up Lionel Messi, the Argentinean super star soccer player, for a multi-year endorsement contract. Lionel Messi, who plays for F.C Barcelona, is set to feature in EA's massively popular soccer franchise.

As per the terms of the contract, Messi will be the brand ambassador of EA SPORTS. EA expects to utilize Messi's popularity for marketing and promotional activities and using his brand value to promote the FIFA soccer franchise. EA will also join hands with the Lionel Messi Foundation to support the social cause of providing education and health care for children around the world.

EA's popular FIFA soccer series has entered its 19 th year and its latest installment FIFA SOCCER 12 has sold over 3.2 million copies in the first five days of its launch. We believe the association of Lionel Messi with the brand will be incrementally positive for the company going forward.

This apart, the recently launched Battlefield 3 is also going great guns. Further, EA expects to launch its highly anticipated massively multiplayer online game Star Wars: The Old Republic in December. However, the company still lags its arch rival Activision Blizzard Inc. 's ( ATVI ) Call of Duty with respect to sales.

We believe that EA has a strong product pipeline that will drive top-line growth going forward. We believe that high-quality titles, an impressive product line, increasing online exposure, social games and portfolio diversification guarantee market share gains over the long term.

EA recently announced a partnership with Shanghai, China-based mobile advertising solutions provider Madhouse. The partnership will enable Madhouse to deliver live advertisements into EA's mobile games in China by deploying its SmartMad intelligent targeting technology. EA primarily intends to expand in the huge Chinese market through diversified offerings, including social games and mobile games.

As EA continues to expand its mobile gaming offerings by introducing more and more free-to-play games, advertising becomes the primary source of revenue in China. We believe the partnership with Madhouse will boost EA's monetization efforts going forward.

However, we expect the company's margins to remain under pressure in the upcoming quarters due to higher marketing costs related to the Star Wars franchise and also because of the gloomy macro environment in North America and Europe, increasing competition and weakness in the video game market during the last 12 months. Such factors compel us to remain cautious in the near term.

We therefore have a Neutral recommendation on Electronic Arts over the long term (for the next 3 to 6 months). For the short term (1-3 months), we also have a 'Buy' rating on the stock, as indicated by the Zacks #2 Rank.

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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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