Oppenheimer, which has a “outperform rating”, raised the price target of Electronic Arts Inc. from $150 to $170 on Tuesday.
This upgrade indicates a possible 20% increase from the current price of $146, reflecting the strong confidence that the company has in its market strategy and prospects.
Oppenheimer’s positive outlook comes amid a variety of analyst opinions. JPMorgan Chase had just a few days earlier maintained its “Neutral’ rating, but raised their price target to $155 from $148.
Citigroup analyst Jason Bazinet changed his rating to “Neutral” but raised the target price to $161. He cited concerns over competition and risks in the market.
Upcoming launches
EA’s highly anticipated videogame, College Football 25, is about to be released. It will contribute significantly to EA’s bookings goal of $7.7 Billion for FY25.
The release of this title is seen by many as a way to counteract the soft bookings for other titles such as Star Wars Jedi Survivor. It is expected that the Ultimate Team feature of this game will generate extra revenue.
EA has also been preparing for important events, such as the Investor Day and the release of Dragon Age The Veilguard. The catalysts may provide more clarity to investors and boost their confidence, if EA is able to continue innovating and capturing market interest.
Earnings expectations
EA faced financial challenges. EA’s recent quarterly report showed that it missed revenue targets by $10 million. This highlights the potential for volatility in EA’s financial performance.
The guidance provided for FQ1 as well as FY25 was not up to analyst’s expectations. This led to a temporary drop in the stock price.
The market was already expecting conservative guidance and College Football’s announcement helped to revive investor sentiment.
EA will need to pay close attention to the upcoming quarterly earnings report due on July 30th. Analysts are expecting an earnings per share (EPS) of $0.89 – a substantial drop from the $1.47 reported in the previous quarter.
The revenue expectations have also been reduced to $1.21 billion from $1.92 million a year earlier, which reflects the ongoing challenges in this industry.
Direction & evaluation of strategic direction
Analysts are continuing to examine EA’s strategic direction, especially its dependence on its live services that contribute significantly to its revenue stream.
EA is credited with making a number of innovative moves, including the introduction of AI technology in games and the use of strategic data for personalization.
EA stock is a complex one from a valuation perspective. Although trading at a multiple that is slightly below the five-year median, EA’s stock remains above its sector median. This suggests that investors will pay a premium for growth potential and its market position.
It is crucial as EA moves through a period where it’s more important than ever to generate new hits and maintain its momentum.
After laying out the fundamentals, which illustrate both Electronic Arts’ challenges and opportunities, we can now turn our attention to technical analysis. The charts will give us more insight into the price of the stock, and whether or not the market’s sentiments are in line with the strategic decisions that may be made.
Trading near resistance levels
Electronic Arts stock experienced a strong rally from 2013 to 2018, resulting in a return of more than 10 times for investors. Since 2018, it’s faced stiff resistance over $150.50. It has tried to breach that level several times, but failed.
EA Chart by TradingView
The stock currently trades very near to the long-term support. Investors who are considering a position in the stock should wait until it closes above $150.50 on a daily basis before initiating one. We can expect this to happen soon if the earnings report proves to be positive.
The stock is currently a good entry for traders who are negative on it. They can currently take a position on the short side near $146.5 with a $151.30 stop-loss. The stock may find some support at the swing low of $125.4 if the downward momentum is evident. This would be a good place to book profits.
The post below asks: Should I invest in EA ahead of the Q2 earnings report? Oppenheimer’s $170 price target could be revised as new information unfolds
