Electronic Arts Inc. (EA) — Shares of this producer of entertainment software and video game consoles gained Thursday in the midst of a broader market sell-off. Buyers jumped on board after Oppenheimer initiated coverage on EA stock with an “outperform” rating and an $83 price target.
Its analysts noted Electronic Arts is slated to release a number of promising new video games including the new “Star Wars: Battlefront,” which is due out on Nov. 17. The company said it now expects to sell 13 million units through March 2016, when its fiscal year ends, up from a previous estimate of 9 million to 10 million units.
According to Credit Suisse, what is more important in the long term is the 10-year deal Electronic Arts struck with Walt Disney Co (DIS) in 2013, allowing it to produce future games based on the “Star Wars” franchise. Credit Suisse also rates EA stock “outperform” with a $90 price target.
Finally, analysts at S&P Capital IQ Equity Research are bullish on the video game maker as well. They note revenues from digital offerings have exceeded revenues from packaged software and that the company’s restructuring has reduced operating expenses by focusing on fewer games. Additional positives include the strength of the balance sheet and a $1 billion share buyback program announced in May. Capital IQ recently raised its earnings estimates and upped the price target to $80 from $72.
EA stock is in a bull market that started three years ago with a breakout from the mid-teens. Shares may consolidate following a double-top at $75.76 and $76.80 in July and October, respectively, but MACD is oversold. And the stock advanced Thursday on average volume against a headwind of general selling.
First support is at the 50-day moving average at $70.15, and then at the 200-day moving average at about $65.
I believe EA stock offers investors excellent intermediate- and long-term value at a buy under price of $70.50. Traders may also want to purchase shares at that price with a target of $80 by year end for a potential gain of 13.5%.
