Electronic Arts Inc. (EA), Zynga Inc (ZNGA): Beware This Sweet Gaming IPO

In an attempt to position itself for the future, EA bought casual game makers PopCap and Playfish. It’s used that platform to produce games like The Simpsons: Tapped Out, but has also started to expand its powerful game portfolio into the casual space. Need for Speed and FIFA are examples of games that have both been ported to the casual space in an attempt to reach new audiences.

With the PlayStation 4 and Xbox One set for a holiday release, EA is likely to see a sales boost as gamers buy into the new systems. The reach into the casual space may help broaden the appeal of its hardcore games, as less serious gamers recognize its brands. That’s particularly true since both Sony Corporation (ADR) (NYSE:SNE) and Microsoft Corporation (NASDAQ:MSFT) are trying to make their game consoles entertainment hubs for the living room, where more casual gamers reside.

Although EA shares are well off of their highs, investors will need to act quickly. Shares will probably have already advanced strongly once the new game cycle starts later in the year.

Avoid the Hype

King’s hot game may be a blast to play, but that doesn’t mean its business model will be any more successful than Zynga’s. Investors should avoid the hot IPO hype and stick to EA, a company with a long and largely successful history in the game industry, including a push into the casual game space.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Nintendo.

The article Beware This Sweet Gaming IPO originally appeared on Fool.com and is written by Reuben Brewer.

Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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