The sale of digital downloadable content, including video games, is on a rise. Consequently, the profits and revenues figures of companies like Electronic Arts (NASDAQ:EA) and Activision Blizzard (NASDAQ:ATVI) are also spiking up, for their revenues primarily depend upon digital purchases.

For the third quarter of the fiscal year 2014, the revues of Activision Blizzard (NASDAQ:ATVI) from digital sales were responsible for bringing in around 65 percent of the total revenues. It is important to mention here that the figures stood at 25 percent for the same quarter a year back. The net gains were recorded to be at 95 percent, on yearly basis; these figures are quite significant when compared with the 23 percent increase in the normal retail channels.

The situation is the same at Electronics Arts (NASDAQ:EA). In its most recent quarter, the company saw a 95 increase in the sales of its digital content, especially the gaming consoles. The net sales of the company saw a push of 30 percent, mainly due to the increase in the gaming consoles segment. The profitability of the company rose from 62 percent to 66 percent.

Where the investors are happy on the rise of sales of digital material, they on the other hand are also worried that this increase would result in a decrease of digital content prices.

According to the reports of GameStop (NYSR: GME), the average selling price of new games’ titles is recorded to be at $22 whereas the retail price of full game currently stand at $60. The gamers, on the other hand, expect the price of the license to fall to $35 in the near future.

It is true that the $22 average price is running low due to the hardware bundles that the gaming companies are distributing and the temporary giveaways that these digital companies are throwing at their customers. For instance, Wal-Mart is selling the latest console pack of PS4 with free vouchers of Call of Duty, Destiny, Madden 15, and Advanced Warfare, thus bringing the costs of the games far below their retail prices. Where these vouchers are providing the latest games at a discounted rate, some other retail stores are throwing free games with their consoles. According to the report of GameStop, the total price of those digital games that have been given away for free with the purchase of the gaming console in the last one year comes to a total of $100 million.

Coming to the stock price of Activision Blizzard (NASDAQ:ATVI), the stocks of the company are currently being traded in the range of $20.23 to $20.45. As far as the beta of Activision is concerned, the figures currently stand at 1.52.

As for the stock prices of Electronics Arts (NASDAQ:EA), during the last trading session of December 24, 2014, the company started its stocks at a price of $47.96 and closed at a price of $48.06, after hitting the highest price of $48.31.

Wedbush also added that the target price of $43, the repeated “outperform” ranking and the World Cup’s high TV rating were instrumental in increasing the video game “2014 World Cup: Brazil” average sales which was receiving average reviews.
On a separate note, Electronic Arts Inc. (NASDAQ:EA) has been rated by the TheStreet Ratings Team as a “Buy” with a B- ranking. According to the TheStreet Ratings Electronic Arts Inc. (NASDAQ:EA) has been given a BUY rating. The reason given by TheStreet for this rating was mainly due to a few strengths exhibited by Electronic Arts Inc. (NASDAQ:EA) which according to TheStreet overshadows its weaknesses. This dominance of strengths will allow an improved performance chance to the investors as compared to other stocks covered by TheStreet. Electronic Arts Inc. (NASDAQ:EA) strengths are in more than one areas that include net income increase, impressive price performance of the stock, a commanding financial position that has good enough levels of debts by usual standards, profit margins that continue to expand and an extremely decent cash flow that comes from its different operations. All these aspects help to overlook Electronic Arts Inc. (NASDAQ:EA)’s relatively disappointing equity return.

According to TheStreet Ratings Team’s analysis:

• Revenue growth and other encouraging elements are being recognized by investors which are similar to elements in the report. A significant increase of 50.00% in the last year has been indicated by company shares. This increase is bigger than the S&P 500 Index’s. The truth is that, in a major bear market, any stock may fall in the future. Nonetheless, stock should continuously increase even though it may have received gains over the previous year, in most other settings.
• Gross revenue growth has risen to 13.6%, increasing from $323.00 million to $367.00 million, as compared to the same quarter in the previous year and surpassed the average of the software industry and S&P 500’s.
• EA’s successful managing of debt levels shows a low of 0.24 debt-to-equity ratio which is less than the industry average, while retaining a sufficient 1.13 quick ratio. This shows it can circumvent short-term money issues.
• ELECTRONIC ARTS INC’s gross profit margin has shown a significant increase reaching 82.24% as compared to the same quarter of the year before. Similarly, its net profit margin comes in at 32.68% which is more than the industry average
• ELECTRONIC ARTS INC has shown an increase of 20.60% or $281.00 million in the net operating money flow as compared to the same quarter of the previous year. Consequently, there is a 10.73% average cash flow growth rate indicating it has exceeded the industry average.