NEW YORK (TheStreet) -- Shares of Electronic Arts (EA) - Get Electronic Arts Inc. Report fell 2.1% to $23.17 on Friday after its Battlefield 4 video game was banned in China, according to media reports.
China's Ministry of Culture called the first-person shooter a threat to national security, according to Barron's. The ministry banned the game and all related material, accusing the video game publisher of using the game as a form of cultural invasion. Chinese gamers who have the game can no longer access online content, and have been asked to delete the game from their consoles and PCs.
The issue seems to hinge on Battlefield 4's recent China Rising expansion. In the expansion, a fictional Chinese general attempts to overthrow the Chinese government, forcing the U.S. and China to join forces against his army. The expansion takes place in several war-torn sections of China in the year 2020.
TheStreet Ratings has assigned Electronic Arts a rating of C, which is a "hold" rating. TheStreet Ratings has this to say about their recommendation:
"We rate ELECTRONIC ARTS INC (EA) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share and compelling growth in net income. However, as a counter to these strengths, we find that revenues have generally been declining."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 26.44% and other important driving factors, this stock has surged by 62.63% over the past year, outperforming the rise in the S&P 500 Index during the same period.
- ELECTRONIC ARTS INC has improved earnings per share by 26.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ELECTRONIC ARTS INC increased its bottom line by earning $0.32 versus $0.21 in the prior year. This year, the market expects an improvement in earnings ($1.26 versus $0.32).
- 49.21% is the gross profit margin for ELECTRONIC ARTS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -39.28% is in-line with the industry average.
- EA, with its decline in revenue, slightly underperformed the industry average of 5.5%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Software industry and the overall market, ELECTRONIC ARTS INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: EA Ratings Report