Analyst Sees Growth Potential For EA, Wider Industry

Wedbush Morgan analyst Michael Pachter continues to see Electronic Arts as a strong contender to outperform even the company's most optimistic immediate sales projections as the game industry enters what he sees as a coming period of growth. In a new analyst note, Pachter reiterated his expectations of 8 to 12 million overall sales for October's Battlefield 3, and noted once again that the surprisingly large success of The Sims Social would likely boost earnings and share prices in the near term. Pachter also noted that sales of EA's major sports franchises -- including FIFA, Madden, NCAA, and NHL -- have shown double digit growth compared to last year in the weeks after their launches. He also expects EA titles like Harry Potter and Tiger Woods to outpace similar fiscal second quarter releases from last year. EA and other game publishers will also benefit from what Pachter sees as an impending turnaround in overall industry software sales data, which has shown consistent year-over-year declines so far this year. In the near term, Pachter sees September's NPD sales report being buoyed by Madden's shift from the traditional August window, as well as the release of Resistance 3 and Gears of War 3. October sales should be up by double digit percentages as well, Pachter said, thanks in part to the expected strength of Batman: Arkham City and Battlefield 3. In the longer term, Pachter feels that sales of Wii and DS software are finally "bottoming out" after declining through 2011, meaning next year's sales results on these systems will look comparatively better. Pachter also expects 3DS software sales to slowly make up for DS declines as "a broad selection of high quality games" sees release. What's more, industry sales are likely to look better, Pachter says, once NPD starts including digital sales in its monthly reports, with EA especially well positioned to benefit from the inclusion.