Electronic Arts Inc. (EA) holds a number of core franchises in the electronic gaming field, with “Battlefield” set to compete against Activision‘s “Call of Duty” this holiday season, yet the real opportunities for EA remain unclear as the company struggles to remain profitable in an increasingly competitive industry that is also going through a console transition, says Brian Pitz, Managing Director and Senior Research Analyst at Jefferies & Company, Inc.
“Activision (ATVI) is the best-in-breed core gaming company, and we believe that EA (EA) has a couple of great core franchises like ‘FIFA Soccer,’ ‘Madden’ football and ‘Battlefield.’ ‘Battlefield’ is anticipated to be released for the holiday season, so clearly a competitor in the first-person shooter space to Activision‘s ‘Call of Duty,'” Pitz said.
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Despite a strong gaming core, EA has struggled to be as profitable as they would like, as the company has had other games perform poorly relative to the investments they made in them, and now will also face challenges within the gaming space due to an increase in competitors and a game-console transition, Pitz says.
“We just wonder what the real opportunity is for EA, other than an easy comp in the December/holiday quarter. Our belief is that ‘Battlefield’ will do well, but it’s pretty much the one title that we’re focused on for EA, and their other games, like ‘Star Wars,’ have performed very poorly, especially relative to the significant investments that EA has made in them,” Pitz said. “Furthermore, within the space, there may be too many core gaming companies headed into the next cycle…we’re not convinced it’s the best time to own these stocks, because gaming companies are on the heels of a console-transition cycle.”
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