Why Electronic Arts Shares Popped

Why Electronic Arts Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of video game publisher Electronic Arts climbed 10% today after its quarterly results topped Wall Street expectations.

So what: Electronic Arts has struggled in recent years amid the growing popularity of mobile games, but a better-than-expected first quarter -- EPS loss of $0.40 on revenue of $495 million -- reinforces optimism that things are steadily turning around. In fact, management delivered a bit of top-line growth all while keeping costs under control as higher-margin digital sales -- downloads accounted for more than 76% of first quarter revenue -- continue to drive the recent resurgence.

Management reaffirmed its guidance for the full year of adjusted EPS of $1.20 and $4 billion in revenue, pretty much in line with analyst estimates. "[W]e are working to ensure that EA delivers the very best games and services on the new consoles, current-generation systems, PC, and mobile," said interim Chairman Lawrence Probst in a conference call with analysts. "Again, the early returns demonstrate we are making significant progress and consumers are excited about our products." Of course, when you couple the stock's massive run of late with the fact that EA still has a long lineup of big, next-gen releases coming up this year, the risk/reward trade-off seems rather unattractive at this point.

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The article Why Electronic Arts Shares Popped originally appeared on Fool.com.

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