Electronic Arts Inc. (NASDAQ:EA) has enjoyed a wonderful year. Its stock is already up 75%. This fall, next-generation gaming consoles would be hitting the shelves. Xbox One and PlayStation 4 might become the profit drivers for the whole gaming industry. Electronic Arts Inc. (NASDAQ:EA) recently reported its quarterly earnings, beating analysts’ estimates by $0.20 per share. Will the stock gain even more steam as we head into autumn, which is a busy season for the gaming industry?
Waiting for the new generation of consoles
The release of the next-generation platforms would be the biggest catalyst this year. It would spur gamers to try new titles on new consoles, thus pushing sales higher. Electronic Arts Inc. (NASDAQ:EA) is heading into the autumn with proven sports series, including FIFA, Madden, NBA Live, and NHL. Other titles, such as Battlefield 4, Sims 4, Need for Speed Rivals, and Plants vs. Zombies are bets outside of the sports genre.
So far, this tactic has been working well. Gamers become addicted to the series and buy each new release. The competitors use the same strategy. Activision Blizzard, Inc. (NASDAQ:ATVI) would meet the new platforms with the next iteration of its Call of Duty series. The company is also battling to regain its World of Warcraft users. Activision Blizzard, Inc. (NASDAQ:ATVI) has lost 1.3 million of WoW subscribers in the first quarter, mostly because Chinese players expressed less interest in the game.
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is planning to release the fifth iteration of its Grand Theft Auto in September. In addition to that, the company relies on its existing portfolio of games, including BioShock Infinite, Borderlands 2, NBA 2k13, and Red Dead Redemption. BioShock Infinite is North America’s best-selling multi-platform release this year. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) had recently released an add-on to Civilization V. This portfolio of games provides a predictable income stream. The company recently announced the selling of $250 million of convertible senior notes due 2018. The proceeds would be used to redeem notes that are due 2014. This would allow the company to avoid conversion of those notes, thus protecting shareholders from share dilution.
What’s in the future?
Despite the continuing shift from “serious” games to casual and mobile ones, the companies have had a decent year. As mentioned above, Electronic Arts Inc. (NASDAQ:EA) is up 75%, while Activision Blizzard, Inc. (NASDAQ:ATVI) is up 74%, and Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is up 50%. The valuations have been rising as well. However, they have not reached huge levels as one could expect given the size of the moves. Electronic Arts Inc. (NASDAQ:EA) trades at 17.5 forward P/E, Activision Blizzard, Inc. (NASDAQ:ATVI) trades at 18 forward P/E, while Take-Two Interactive Software, Inc. (NASDAQ:TTWO) trades at 15.7 forward P/E.