Reasons behind the significant year to date increase in stock price of <a href="www.goog.biz/2013/08/02/profits-by-electronic-arts/">Electronic Arts</a>. The stock price of the company has increased from $14.55 to $26.07 per share, soaring by 79%. It has increased due to the margin expansion of the company, high growth in digital sales and two positive events which boosted the share price of the company. In the fourth fiscal quarter of 2013, the company’s digital revenue has increased by 45% and it helped the company to mitigate the negative impact of the 25% drop in the revenue of publishing packaged goods. All the business units in the digital revenue segment have witnessed an increase in revenue. The major increase came from Full-game downloads whose revenue has increased by 65% on YOY basis, followed by the subscriptions and in-game advertising segment, Extra downloadable content (DLC) and the mobile gaming segment which have soared by 54%, 35%, 31% on YOY basis respectively. The total revenue of the company has increased by 6% compared to the previous year.
The gross margin of the company has improved to 74%, increasing by 10 basis points due to its cost cutting and a significant rise in the digital revenue of the company. The company’s margin on physical products is around 49% compared to the 70% gross margin on online and digital service. In addition, the company has announced a restructuring plan based on which it plans to lay off many of its workers. The company plans to reduce its work force by 10%.
Profits by Electronic Art