EA Results Will Show the Gaming Battle Rages on Multiple Fronts

As Electronic Arts (NASDAQ:EA) is scheduled to announce its Q3 financial results on February 1st. ^[1] Analysts and investors will have a close eye on EA’s digital initiatives during the quarter. First and foremost EA launched its much anticipated MMO Star Wars: The Old Republic during the quarter, which has put EA directly in competition with rival Activision Blizzard’s (NASDAQ:ATVI) World of Warcraft. Additionally with the success of Sims Social and other initiatives such as acquisition of KlickNation the competition between EA and Zynga (NASDAQ:ZNGA) has also intensified.

We value EA with a $20.60 Trefis price estimate of its stock, which is roughly 15% above its current market price.

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Star Wars: The Old Republic to remain center of focus

EA’s highly anticipated MMO Star Wars: The Old Republic (SWTOR) was finally launched this quarter. Both pre launch and post launch reception of SWTOR have been phenomenal, with the sales figure standing at 2 million by 14th January, according to Vgchartz.com. In addition to the total subs till date, we will also be keenly watching EA’s strategy for the game going ahead.

As Blizzard’s World of Warcraft (WoW) subs have started to show a decline since last two quarters, the numbers on SWTOR will be a good representative of the scale of competition between EA and Activision. Both SWTOR and WoW are high profile games for their respective companies, as in addition to the massive scope of constant revenue generation, MMORPGs often carry higher margins than other video games.

Competition between EA and Zynga will also be interesting to watch

In addition to SWTOR, we believe increasing competition between EA and Zynga will also be one of the major highlights on Wednesday. The competition between the two companies has increased considerably after the success of EA’s The Sims Social on facebook. Additionally, EA is also increasing the span of its social games, which we believe will help the company to take on Zynga more effectively. Recent acquisition of RPG (role playing game) developer KlickNation is  one such step in this direction.

See our article: EA Acquires KlickNation To Strengthen Hold in Social Games

Zynga also reverted back in reply, poaching the head of EA’s mobile and social gaming division, which caused EA’s stock to slide by nearly 7%. We will also be following if there is any update in this regard.

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1. EA to release Q3 results on February 1st, Source: EA IR [↩]