Most of physical world are being transformed by covid-19. Now live professional sports is getting its digital makeover, too, observes tech sector expert Jon Markman, editor of Strategic Advantage — and a participating speaker at MoneyShow's Virtual Event on June 10-12.
Electronic Arts (EA), the National Football League and the NFL Players Association recently announced a multiyear agreement to create exclusive digital content for professional football. It’s a huge new opportunity.
The deal between Electronic Arts, the NFL is a major rethink of the way fans interact with professional sports, and it’s likely to create unimaginable new value for stakeholders.
The point of the spear is the wildly successful Madden NFL video game franchise. The title, born in 1988, is now in its twentieth iteration.
Madden NFL eSports, a business dedicated to broadcasting live, head-to-head gameplay by professional gamers has seen viewership soar. Tournaments, including events with NFL players, have drawn millions of viewers on ESPN, ESPN2, and FS1.
The content helps the NFL reach out to younger people who have been turning away from pro football fandom. It helps star players build their personal brands with a wider demographic. It’s a concept that can be duplicated with other sports leagues across the globe. FIFA 20 is the latest version of EA’s soccer simulation software.
Electronic Arts is building a new business vertical to take advantage of that enthusiasm, and it has the blessing of professional sports leagues and its best influencers. Investors are vastly underestimating the potential financial value to Electronic Arts.
Shares trade at only 21.9x forward earnings and 6.4x sales. In fiscal 2020, the company earned $3 billion in profits on only $5.5 billion in sales. And Refinitiv, a data researcher, found that analyst earnings expectations have risen 99% since the last quarter. They expect revenues to reach $6 billion in 2021 and grpw 14.5% in 2022.
The stock is up 14% in 2020 but the real gains lie ahead as managers begin to exploit relationships with live sports. Shares could trade to $195 within 2 years, a gain of 61% from current levels. Growth investors should consider buying Electronic Arts on pullbacks.
