Electronic Arts: Sims to Soccer

06/30/2014 8:00 am EST

Focus: STOCKS

Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

The digital revolution has taken the video game market by storm, and this recommended stock is a gaming giant that is taking full advantage of the movement, observes Mike Cintolo, editor of Cabot Top Ten Trader.

Electronic Arts (EA) is responsible for some of the biggest software titles in the industry, including Battlefield, FIFA Soccer, Madden NFL, The Sims, and Need for Speed, Electronic Arts is in the midst of a turnaround, driven by CEO Andrew Wilson’s focus on digital gaming.

In fact, digital revenue accounted for 45% of EA’s better-than-expected fourth-quarter sales, released on May 6. And, while overall revenue declined year-over-year, EA still exceeded the Street’s projections.

The company plans to place additional emphasis on the increasingly lucrative digital marketplace, with more live services for its games in the works and increased projections for full-game downloads.

Additionally, EA has had great success with the latest generation of consoles from Microsoft and Sony; it’s FIFA 14, Titanfall, and Battlefield 4 were three of the top five best-selling titles across all platforms in North America and Europe.

Lastly, at the recent E3 convention (held in LA on June 10-12), EA noted that it expects to see lift for its FIFA series due to the World Cup, and that its share of the first-person shooter (FPS) market should strengthen due to continued success with its Titanfall and Battlefield titles.

After spending much of last year in rally mode, EA shares hit a snag heading into the holiday shopping season. After peaking near $28 in August, EA retreated into the low $20s, where it held through early January.

The shares sparked to life once again in early February, as holiday sales came in better than expected, but resistance at $30 failed to give in March. On May 7, however, EA jumped the most in 24 years, surging 21% as earnings indicated that a turnaround was in full swing.

Shares then consolidated in the mid-$30s for a month, and last week brought a push to new highs. You can buy here if you’re not yet in, with a stop around $32.

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