Technology

EA pins hopes on new mobile games as lockdown boost fades

2 minute read

The Electronic Arts Inc., logo is displayed on a screen during a PlayStation 4 Pro launch event in New York City, U.S., September 7, 2016. REUTERS/Brendan McDermid/File Photo

Register now for FREE unlimited access to reuters.com

Aug 3 (Reuters) - Video game publisher Electronic Arts Inc's (EA.O) big bet on mobile gaming will be tested in its quarterly results on Wednesday, as pandemic restrictions ease and gamers leave their consoles to step outside.

EA, the maker of "FIFA 21" and "Apex Legends", expects its mobile business to grow more than 200% to $2 billion in annual net bookings within the next three years.

"When it comes to the mobile gaming industry, it is important to note that the 'console' is in the user's pocket," Berenberg analyst Jamie Bass said.

Register now for FREE unlimited access to reuters.com

"Whether one is on the bus to work or waiting in an airport terminal to finally go on holiday again, mobile games remain a persistently tempting and available entertainment option."

The booming mobile gaming sector, the largest sub-segment of the broader industry in terms of revenue generation, has made EA and rivals such as Activision Blizzard Inc (ATVI.O) make significant purchases.

For EA, mobile games make up for more than a tenth of its overall revenue.

Reuters Image

For a graphic, click here: https://tmsnrt.rs/3xlZUq3

THE CONTEXT

EA spent billions of dollars to acquire Glu Mobile, UK-based Codemasters and Playdemic Ltd, to bulk up its mobile gaming portfolio with more gaming titles.

Consumer spending on videogame hardware, content and accessories in the United States alone jumped to a record $56.9 billion in 2020, according to data from research firm NPD.

"They are using this windfall to future-proof themselves by acquiring intellectual property and talent, and by establishing a foothold in new categories," Joost Van Dreunen, a lecturer on the business of games at New York University, said.

Acquiring studios with strong mobile franchises will enable EA to inherit the expertise and monetize on the already existing player base at the same time.

FUNDAMENTALS

* Redwood City, California-based EA is expected to report ​a 7.8% fall in first-quarter revenue to $1.28 billion, from $1.39 billion a year earlier, according to IBES data from Refinitiv.

* The analyst mean estimate is for earnings of 67 cents per share.

* The company's shares, which gained nearly 34% in 2020, rose marginally this year.

Reuters Image

For a graphic, click here: https://tmsnrt.rs/3xlThUR

WALL STREET SENTIMENT

* The current average analyst rating on the stock is "buy", with 23 "strong buy" or "buy", 10 "hold" and no "sell" or "strong sell".

* The median price target is $168 versus the current price of $144.11.

Register now for FREE unlimited access to reuters.com
Reporting by Tiyashi Datta in Bengaluru; Editing by Sweta Singh and Shounak Dasgupta

Our Standards: The Thomson Reuters Trust Principles.

More from Reuters