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Electronic Arts Puts Efforts on New Brands, Cost Cutting

The “Sector Outperform” rating remains steady for Electronic Arts. It is strongly believed that they are well positioned to gain, due to an ongoing focus on controlling operating expenditures, while also maintaining a solid portfolio of brands, industry upticks in console adoption and the continued movement toward Direct to Consumer digital revenue businesses.
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Electronic Arts has the placement to be able to further their operating margin growth, driven by operating expense control, gross margin growth and expanding their top line. Engaging with its players remains a focus for EA. They are on solid footing and should stay ahead of the curve, developing their portfolio of brands through the new generation of gaming consoles. Staying with less core titles and improving those few, along with growing digital revenues, should leave them on an upward trend for the foreseeable fiscal future.

A target price of $45, based on 17 times fiscal year estimates with net cash, holds steady. Starting well and maintaining a leading share on the current generation consoles from Microsoft and Sony puts Electronic Arts in a positive position that should foster growth. Their impressive collection of core titles, solid digital growth and a good hold on cost control allow EA to leverage its portfolio of key brands and developing business models via various platforms. In turn, they will reach and monetize a much larger group.

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