Electronic Arts' (NASDAQ:EA) stock surged after posting terrific fourth-quarter results. The Redwood City-based company hammered analysts' estimates by a big margin, driven by sales of new consoles from Microsoft (NASDAQ:MSFT) and Sony that led to strong demand for its games. Moreover, EA's digital sales also gained momentum in the quarter.
However, the question is, will EA be able to sustain its momentum in the wake of competition from bigger players such as Activision Blizzard (NASDAQ:ATVI)?
The pipeline looks strong, very strong
Electronic Arts delivered outstanding results on the back of hit games and innovative digital content. Looking ahead, the company is optimistic about its performance in fiscal 2015 and beyond. It expects that the introduction of the two new consoles, along with continued growth in mobile gaming, will help it perform even better going forward.
According to management, in 2014, EA is the no. 1 publisher on the new consoles with 40% segment share in North America and Europe. The company believes that its strong line-up, which includes games such as Plants vs. Zombies Garden Warfare and Titanfall, should continue bolstering its performance going forward.
In addition, EA has lined up several new games for the current fiscal year that are spread across the console, PC, and mobile platforms. EA will also be introducing new content for its existing games in order to prolong their lifecycles and revenue prospects.
To tap into the Soccer World Cup in Brazil, EA recently launched FIFA World Cup 14. It has included all 203 FIFA-sanctioned national teams, along with 21 stadiums and 11 game modes. "FIFA" is one of EA's most successful franchises and this new launch should help it capitalize on the World Cup fever going forward.
EA's launch pipeline also includes the highly anticipated EA Sports UFC on June 17. The game will be powered by EA Sports' Ignite engine, and try to tap the growth of the new consoles by illustrating the athleticism, emotion, and intensity of UFC in an immersive manner.
EA is known for its sports games. Apart from FIFA World Cup and UFC, the company will be launching the new yearly editions of its major EA Sports franchises -- Madden NFL 15, FIFA 15, and NHL 15. Two more EA Sports titles are scheduled to be launched in the last two quarters of the fiscal year -- NBA Live 15 and the EA Sports Golf game, designed by its development teams in Florida.
The company is preparing to showcase a strong lineup of games for E3 this year. These will include first looks, demos, and other new announcements for many titles from this year's pipeline. EA also plans to unveil details of six new projects that are under development.
More importantly, EA will launch fewer titles in fiscal 2015 as it is focusing on delivering top-quality games and services rather than quantity. This looks like a good move since it is competing with a strong player such as Activision.
Concerns and competition
Activision's "Call of Duty" franchise has been a runaway success over the years, but EA is looking to change that with "Battlefield." However, EA had lost the initiative with Battlefield 4 last year due to problems in multiplayer gaming. The connectivity issues that the game faced persisted as recently as last month, with DICE Studios, the game's developer, promising to fix server issues that were affecting gameplay.
Battlefield 4's troubles likely pushed gamers away from EA's fold toward Activision's Call of Duty: Ghosts. Activision claims that this franchise is still the best-selling game on the latest generation of consoles, ahead of the likes of FIFA 14, Assassin's Creed IV, and Battlefield 4. Looking ahead, Activision is set to provide more competition to EA through Destiny, its upcoming shooter title. It has been reported that Activision is investing $500 million in the game and expects it to generate more than $1 billion in sales. So, EA needs to pull up its socks.
The company has lined up two more expansion packs for Battlefield 4. In addition, EA will also be releasing three map packs for Titanfall to revive the underperforming franchise. Titanfall sold less than a million copies in its first three weeks in North America, which is disappointing according to analysts' estimates. Moreover, the game's performance was not as great as expected since it was limited to just Microsoft's Xbox One.
Sales of the Xbox One haven't been as great as the PlayStation 4, and this is probably why Titanfall underperformed. However, on the back of new content and the fact that Microsoft is looking to push sales of its console with bundled packs, Titanfall's performance might improve. As reported by Gamepur, Microsoft is offering an Xbox bundle with a copy of Titanfall, Tomb Raider: Definitive Edition, an extra controller, and an Xbox Live Gold Card for 12 months. The upcoming versions of Titanfall will also be released on the Sony PlayStation 4.
With this in mind, an improvement in Titanfall's performance cannot be ruled out going forward.
Although EA is facing stiff competition from Activision in shooter games, its pipeline looks strong and new content packs should help it compete better. The company's stock has soared almost 53% in 2014, but there seems to be more upside going forward as EA's new games hit the market.
Mukesh Baghel has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.