The demand for video games remains robust despite people returning to outdoor activities as the end of the COVID-19 pandemic looms and distancing mandates are eliminated. Indeed, the global video gaming market is expected to hit $293.2 billion by 2027, growing at a 9.3% CAGR.
Despite the favorable backdrop, Roblox Corporation (RBLX – Get Rating), a San Mateo, Calif.-based online entertainment platform provider, hasn’t been able to keep up with industry trends. Although the newly public company has the potential to grow its user base in the long run, the company might not be able to retain its existing users and grow due to its weak financials. In its last reported quarter, RBLX’s net loss increased 80.5% to $134.22 million, and its loss from operations surged 85.1% to $135.06 million. The stock has declined 5.1% over the past month.
Conversely, video game companies Electronic Arts Inc. (EA – Get Rating), Playtika Holding Corp. (PLTK – Get Rating), and Ubisoft Entertainment (UBSFY – Get Rating) are likely to experience a spike in sales because they are investing extensively in their R&D to introduce new games aligned with consumers’ interests that will also enhance the overall experience.
Since these three companies have a lot of room to grow, we believe they are better bets now.
EA creates and publishes games, content, and services for a variety of platforms, including consoles, PCs, smartphones, and tablets. The company’s games and services are built on a portfolio of intellectual property that includes well-known brands that include FIFA, Madden NFL, Star Wars, Battlefield, Sims, and Need for Speed. EA is based in Redwood City, Calif.
Last month, EA acquired Warner Bros. Games’ Playdemic Ltd. for $1.4 billion in cash. The purchase was primarily intended to assist EA extend its sports portfolio and speed its growth in mobile, allowing it to reach more people worldwide with more games and content.
During the fiscal period ended March 31, 2021, EA’s net revenue increased marginally year-over-year to $5.63 billion. Its net cash from operating activities surged 7.6% to $1.93 billion over this period. The company’s cash and cash equivalents grew 39.6% year-over-year to $5.26 billion.
A $6.38 consensus EPS estimate for the current year represents an 11% increase year-over-year. Furthermore, EA has an impressive earnings surprise history; it beat consensus EPS estimates in each of the trailing four quarters. The $7.39 billion consensus revenue estimate for its fiscal year 2022 represents a 19.5% increase from the same period last year. The stock has gained 14.4% over the past nine months.
EA’s POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. EA has a B grade for Value and Quality. Within the Entertainment-Toys & Video Games industry, it is ranked #9 of 23 stocks. To see more of EA’s component grades, click here.
PLTK is a mobile game developer with a platform that supports a range of games, provides live game operation services and unique technologies. The company owns and administers 15 games, including free-to-play mobile games. Apple, Facebook, Google, and other online and mobile platforms are used by the company to distribute its games.
In March, PLTK announced that it has entered a…
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