What happened
Video game publisher Electronic Arts (EA +0.27%) stock gained 34% through the first half 2017, according to data provided by S&P Global Market Intelligence.
The rally sent shares to new record highs, although EA's return this year has trailed that of its bigger rival, Activision Blizzard (ATVI +0.00%).
So what
Most of the stock's gain came after the company announced fiscal fourth-quarter results in early May. In that report, EA revealed surprisingly strong operating trends, with sales, profitability, earnings, and cash flow all beating management's guidance on the year.
EA's fourth-quarter numbers benefited from solid releases in both the Battlefield and FIFA franchises. And, like Activision Blizzard, the developer is benefiting from surging demand for highly profitable digital sales.
Image source: Getty Images.
Gross profit margin jumped to 73% over the past 12 months, compared to 69% in the prior year period. "We generated record net sales and operating cash flow in fiscal 2017, driven by our ongoing transition to digital as well as our increasing success with live services," Chief Financial Officer Blake Jorgensen said in the early May press release .
Now what
EA enters its 2018 fiscal year with a huge pool of engaged gamers and a deep portfolio of valuable content that spans console, PC, and mobile gaming. Those tailwinds are projected to help push revenue up 5% for the year as gross profit margin expands to 75% of sales.
Sure, a botched title release in one of its biggest franchises would threaten those aggressive targets. But, barring an upset like that the business seems set to enjoy rising sales and record profitability thanks to rising demand for in-game purchases and full-game downloads.
