Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Zynga Inc (ZNGA), Electronic Arts Inc. (EA): Producing Consistent Hits

Forget Zynga Inc (NASDAQ:ZNGA). Well, that’s not hard to do after its terrible stock and revenue performance. Electronic Arts Inc. (NASDAQ:EA), the company behind popular PC and console games like Madden and Mass Effect, is actually faring much, much better. They’ve got $1.5 billion in cash on their balance sheets and made $2.5 billion in net profits last year. Electronic Arts Inc. (NASDAQ:EA) did another $755 billion in profits last quarter and they’re on track for another monster year.

Its producing consistent hits

The video game industry is a hit-or-miss business. Yet, Electronic Arts Inc. (NASDAQ:EA) seems to be hitting more and missing less these days. Its flagship product, the Battlefield series, appears on track for another blockbuster release later this year. A winning streak that started with Battlefield 2 selling 1 million copies and ended with Battlefield 3 selling 8 times what Battlefield 2 did. 8 times! (8 million copies.)  .The Internet is going crazy over a recent game play trailer of Battlefield 4, its most recent installment in the series.

Electronic Arts Inc. (NASDAQ:EA)

In addition to the Battlefield series, the company has at least five moderately to hugely successful recurring franchises: Madden, Mass Effect, Crysis, Medal of Honor and The Sims. They each sold 1.6 million  , 3.5 million , 260,000 , 650,000  and 1.4 million , respectively, in their latest releases. Not bad.

Here’s the interesting thing. Except for Madden and The Sims, none of these franchises existed 10 years ago. Electronic Arts Inc. (NASDAQ:EA) seems to have a knack for consistently producing fun, immersive games that people want to play, and that hasn’t seemed to let up or fall off. EA’s gamers are not fickle or casual, which is actually to Electronic Arts Inc. (NASDAQ:EA)’s credit, as you will soon see.

Trouble in Zynga-ville

The trouble for Zynga Inc (NASDAQ:ZNGA) is it’s having a tough time holding onto its user-base. In the last year, it’s gone from 72 million daily active users to 39 million daily active users. Monthly active users (folks who might play once or twice a month) are down from 306 million to 186 million, a decrease of 45% and 39%, respectively, in just one year.

Remember that acquisition the company made of app developer OMGPOP and its “Draw Something” app not even 2 years ago? Well, their $180 million investment was disappointingly shuttered. Its massive loss of users has definitely hit it in the pocketbook. The company just reported a loss of $16 million for the second quarter. It’s imploded from over $300 million in quarterly revenue the previous year in 2012 to $231 million.

I’d wager the reason why Zynga Inc (NASDAQ:ZNGA) is struggling to keep its users and maintain its revenue is probably due to the notoriously fickle demographic the company primarily caters to. They play Zynga Inc (NASDAQ:ZNGA) games when they’re bored and passing time, at work, or with recommendations from friends . An app can enjoy a fast, meteoric rise, only to face steep declines in users in favor of another more popular app because users are always moving on to next best thing. It’s cyclical. This puts the pressure on Zynga Inc (NASDAQ:ZNGA) and other social gaming companies even more so than companies like Electronic Arts Inc. (NASDAQ:EA), which focus on console and hardcore gaming because hardcore gamers care less about fads and more on the mechanics and intensity of the gameplay itself.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.