Electronic Arts’ stock is one of the “Most Dangerous Stocks for December,” according to financial blog NewConstructs.
The blog shows a good understanding of the company in recent years, looking at its various franchises and discussing the state of EA in light of the trouble with Battlefield 4.
Perhaps the most surprising aspect of the analysis is the fact that Battlefield‘s significance for EA is surpassed only by FIFA. In fiscal year 2012, Battlefield 3 accounted for more than 10 percent to EA’s revenue, according to the blog. When put in those terms, it’s easy to see why EA is putting other projects on hold to get the troubled release fixed. The other surprise was hearing that Madden is below Battlefield on the chain, making me wonder if the NFL license is as valuable to the company as it seems to think.
The blog states that EA’s earnings and margins are relatively steady, with investments and resultant return growing together, which ends up as very little change to the return on investment.
NewConstructs takes a moment to point out to the non-gamers that might be reading that game development is in an interesting place. Where book publishers and movie studios have talent coming from outside, pitching projects that they can then greenlight or reject, game developers create their new content primarily in-house. Electronic Arts and companies like them not only distribute products but develop them internally as well.
Interestingly, they seem to have done this consciously and a bit erratically. For a while, EA was snapping up every game company they could find, BioWare and DICE being the most notable. Then they started partnering with smaller companies on the EA Partner program, though that seems to have taken a back seat recently. So in other words, it seems like EA put themselves in this spot.
Until EA can fight its way out of this paper bag, though, it sounds like their stock isn’t going to be one that investors are piling on.