Electronic Arts jumps 12% as upbeat analysts see path to more growth
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Electronic Arts (NASDAQ:EA) has rebounded from a Tuesday postmarket dip, up 12% in Wednesday trading after its earnings report showed stronger profitability despite low bookings guidance.
Wall Street generally liked what it saw from a quarter that was in line with expectations in some ways, but impressed in key other areas. MoffettNathanson upgraded EA stock to Buy from Neutral, and set its price target to $141.
Jefferies reiterated its Buy rating, noting its surprise at an increase in full-year guidance amid the sector pressures right now.
"With a new CFO and on the heels of a disappointing major title 1Q ago, it's almost shocking," analyst Andrew Uerkwitz says. "We prefer a de-risked stock in this environment, but we appreciate the bold move as it relies on mobile, FQ4 launches of new titles, and solid execution through a tumultuous time."
The firm was convinced that guidance didn't include a major title, but then noted the updated slide deck indicates a major title for Q4 along with two sports titles (in golf and baseball), a remaster and a partner title. It expects Star Wars Jedi: Fallen Order 2 as the major title: "We don't expect Dragon Age or Skate to be big enough or ready in time for a FQ4 launch."
Uerkwitz maintained a $165 price target, implying 32% upside.
Wedbush kept its Outperform rating as well, but trimmed its target to $164. The quarter was in line with his expectations, analyst Michael Pachter says, but "We expect growth in the foreseeable future driven by cost discipline, digital sales growth, several key franchises, and multiple recent acquisitions."
Credit Suisse also maintained an Outperform and cut its target to $162. It reiterated its thesis that EA can unlock key franchises to mobile, and doesn't see a sea change from the transition of its soccer franchise from FIFA to EA Sports FC. "The most significant change will likely be its inability to show World Cup-related content â with that in mind, EA will retain much of its licensing agreements with 300+ IP partners (e.g. Premier League, Bundesliga, MLS, as well as various teams as well as FIFPro for player likeness/names)."
For more detail, dig into Seeking Alpha's transcript of EA's earnings conference call.