With travel bans and drastic cuts to people travelling because of Covid-19, Electronic Arts (EA), a leader in digital interactive entertainment globally, could be buoyed by more uses. It attracts participants for its gaming content and titles which include the likes of FIFA, The Sims and Need for Speed. Our thesis for investing in this company is based on its new business model, which is focused on optimising its already high margins and generating stable earnings and revenue growth. EA is both a growth and value stock, given its prospective gaming titles lined up over the next few quarters, its broad-based business model that reduces dependence on individual titles, as well as its strong financials. EA recently reported its results for 3QFY2020 ended Dec 31, 2019, and it mostly outperformed expectations – with record sales and growth in revenue, earnings per share and cash flow on a y-o-y basis. The company expects stable growth in revenue and earnings for FY2020, along with share repurchases to return value to shareholders. Both digital and packaged sales of titles are also expected to grow strongly, driven by its blockbuster FIFA and Madden franchises, along with the launch of the new Battlefield.
SINGAPORE (Mar 13): In our story “10 global stocks in an ‘unloved’ bull run” (Issue 917, Jan 24, 2020), we highlighted 10 global stocks, picked for either their cheap valuations, strong balance sheets, defensive businesses or their ability to withstand economic shocks. On average, as a group, the 10 stocks have outperformed the market indices, but were unable to outrun market sentiment.
With recent developments in the economy, particularly with the supply and demand shocks associated with Covid-19 and the oil price drop, we are taking stock of the 10 global stocks. The stocks we chose cover a range of sectors and profiles – from growth stocks to turnarounds, to just those that looked cheap relative to the market. We believe the stocks represented intra-asset diversification through portfolio allocation, a key to being successful in investing, and this is particularly true in a market experiencing a decline. We have updated our investment case for each stock, along with any key business updates, valuations and performance for the year against comparable benchmarks.
