Key Points
- Electronic Arts is a major video game publisher with the hottest franchises including Madden NFL, EA Sports FC, The Simms, Need for Speed, Apex Legends and Battlefield.
- Electronic Arts offers a $5.99 EA Play subscription, providing members access to its library of video games, and has over 600 million active gamers signed up to its EA players network.
- Take-Two Interactive is one of the best-selling video game franchises with its Grand Theft Auto series, as fans eagerly await the release of Grand Theft Auto VI in the calendar year 2025.
- 5 stocks we like better than Electronic Arts
Video games have come a long way since the Atari 2600 era. The advent of gaming engines like Unreal Engine and Unity Software Inc. NYSE: U have enabled independent studios and publishers to have unlimited possibilities for creating ever more realistic games. The popularity of esports and live service online gaming with player-vs-player (PVP) games like Fortnite to player-vs-everyone (PVE) games like Diablo IV and, most recently, Hell Divers 2 by independent studio Arrow Head, have changed the dynamics of the industry.
More and more video games are requiring internet and network subscription access, like Sony Group Co. NYSE: SNE PlayStation Plus, and Microsoft Co. NASDAQ: MSFT Xbox Live. Great independent publishers are being acquired by the major game publishers who continue to dominate the space. Here are two major video game publishers in the consumer discretionary sector benefitting the most from the rebound in video gaming.
Electronic Arts
Electronic Arts Inc. NASDAQ: EA is one of the largest video game publishers in the industry. They have built a number of long-running franchises like Madden NFL Football, Medal of Honor, The Simms, Need for Speed, Battlefield and EA Sports FC (formerly FIFA International Soccer). While their EA Sports segment has a large following, they have one of the hottest live service online multiplayer first-person shooters (FPS), Apex Legends, that compete heavily with Fortnite and Overwatch.
EA has been criticized for its penchant for microtransactions, loot boxes, and lack of innovation. The company has a subscription plan called EA Play, giving unlimited access to its library of titles for $5.99 a month, with a price hike expected soon. It has over 600 million active players in its EA player network.
Daily Falling Channel
The daily candlestick chart on EA illustrates a falling price channel. This pattern comprises a descending upper trendline that formed at $144.16 on Feb. 22, 2024, capping lower highs on the bounces and a lower descending trendline representing lower lows on pullbacks. Each bounce attempt occurs at a lower high off a lower low. The daily relative strength index (RSI) is falling towards the 30-band.
Green Losing Steam
Electronic Arts reported fiscal Q3 2024 EPS of $1.07, beating consensus estimates by 19 cents. Revenues rose 1% YOY to $2.37 billion, falling short of the $2.4 billion consensus estimates. Net bookings rose 1% YOY to $2.366 billion. Live services and other net bookings achieved a record $1.712 billion, up 3% YOY. The EA Sports FC franchise delivered 7% YOY net bookings growth, which was even more impressive since last year was the World Cup. EA Sports Madden NFL had 5% YOY booking growth.
The company bought back 2.5 million shares for $325 million in the quarter for a total trailing 12-month buyback of 10.4 million shares for $1.3 billion. The Board declared a 19-cent per share dividend payable on Mar. 20, 2024 to shareholders of record on Feb. 28, 2024.
Lowered Guidance
Electronic Arts provided lower-than-consensus guidance. It sees fiscal Q4 2024 EPS of 20 cents to 68 cents versus the consensus estimates of 70 cents. Revenues are expected to be between $1.625 billion and $1.925 billion versus the consensus estimates of $1.83 billion.
Electronic Arts CEO Andrew Wilson said, "Our incredible teams delivered a strong Q3, entertaining hundreds of millions of people across our portfolio, driving deep engagement and record live services. We remain focused on growing our biggest franchises and delivering new, innovative games and experiences for our global communities.”
Take-Two Interactive
Take-Two Interactive Inc. NASDAQ: TTWO is best known for its Rockstar game studios that created the infamous Grand Theft Auto (GTA) series. The latest GTA V was released in 2013 and continues to sell physical and digital copies on next-generation systems. It is the third highest-selling title of all time, with over 195 million copies sold since 2013. Its GTA V online service dominates engagements as the company updates features, items and quests. However, the big news is the upcoming release of GTV VI. There hasn't been a release date yet, but the first trailer, released on Feb. 12, 2024, broke records by generating over 175 million views on YouTube in the first 24 hours.
2K Sports and Franchises
Take-Two has a number of franchises, notably in the 2K Sports line, which includes NBA 2K, PGA 2K, and WWE 2K. Its Red Dead Redemption series has been critically acclaimed as one of the deepest and best Western video games of all time. Its Red Dead Redemption 2 game continues to sell online even though it was released in October 2026.
Daily Bear Flag Pattern
TTWO’s daily candlestick chart illustrates a potential bear flag breakdown after forming the lower ascending trendline at $141.45 on Mar. 14, 2024. Shares peaked at $156.25 on Apr. 9, 2024, and shares fell below the lower ascending trendline as the daily RSI fell through the 50-band. Pullback support levels are at $141.45, $137.25, $135.73 and $130.34.
The Ship is Taking on Water
Take-Two reported a fiscal Q3 2024 EPS loss of 53 cents, beating consensus estimates by 18 cents. Revenues fell 3.1% YOY to $1.34 billion, matching consensus estimates. Zynga's Toon Blast led in-app purchases. Red Dead Redemption, GTA Online and GTA V exceeded plans during the quarter. NBA 2K24 and mobile advertising saw softness in sales. The company still expects lifetime NBA 2k24 net booking to be in line with NBA 2K23.
Downside Guidance
The company is pushing out Zynga's hit mobile title Match Factory of the fourth quarter to increase its marketing. This entails them lowering its guidance. The company sees an EPS loss of 90 cents to $1, versus a loss of 54 cents consensus estimates. Revenues are expected between $1.27 to $1.32 billion versus the $1.51 billion consensus estimates.
Holding Out for GTA VI
Take-Two CEO Strauss Zelnick noted the strength of its powerful franchises. GTA V sales exceeded expectations driving units up past 195 million copies worldwide. The holiday update for GTA Online, called the Chop Shop, captured the highest number of active users in years, including the largest increase ever for GTA Online user accounts. This was attributed to the variety and depth of new cars in robberies and positive community sentiment. According to its earnings presentation, the company expects to launch GTV VI in the calendar year 2025.
Zelnick briefly touched on GTA VI saying, “The Grand Theft Auto series is also benefiting meaningfully from the excitement surrounding Rockstar's announcement of Grand Theft Auto VI and the release of its first trailer, which, at 93 million views in 24 hours, broke YouTube's records for a non-music video launch and, along with partner channels, became the biggest video debut ever.... Rockstar’s recent partnership with Netflix to launch the GTA Trilogy is also a resounding success, quickly yielding the highest rate of installs and engagement on the subscription services game platform.”
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