Will Electronic Arts Make a Comeback?

With shares of Electronic Arts (NASDAQ:EA) trading at around $14.11, is Electronic Arts an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Electronic Arts isn’t performing as well as it has in the past, but you should never bet against a company with improving annual revenue and EPS, a great name, and a lot in the pipeline. The Madden franchise made Electronic Arts what it is today. This franchise will continue to be the face of Electronic Arts for years to come, but Electronic Arts is far from one-dimensional.

Star Wars: The Old Republic has seen disappointing results thus far. There has been a declining subscriber base, but Electronic Arts states that these were mostly casual gamers trying it out. However, if that’s the case, then why didn’t those casual gamers become hooked? The game simply isn’t that enticing to a hardcore gamer. That can be evidenced by the 3.5-star consumer rating (of five stars) on Amazon.com (NASDAQ:AMZN). This is based on 642 reviews. Of those reviews, there are 273 five-star ratings and 142 one-star ratings. The 273 perfect ratings are nice, but 142 one-star ratings is pretty steep. The good news is that there is hope. And what’s Star Wars without hope?

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There will be an expansion pack, Rise of the Hutt Cartel, released in the spring of 2013. Electronic Arts has a great track record with expansion packs, and there are many people already preordering Rise of the Hutt Cartel. Remember, sometimes the sequel is better than the original (i.e. The Empire Strikes Back vs. A New Hope.)

We can talk about this company’s vast array games all day long, but what’s most important is that they have been growing revenues for three consecutive years despite challenges in the industry. We’ll get into those industry challenges soon, but let’s first take a look at some important numbers.