Electronic Arts Stock Recovers From January’s Drop

Key Takeaways

• Video game maker Electronic Arts' price target was raised Friday by Oppenheimer to $170, a roughly 15% premium to Friday's close.
• Wall Street's current average price target for Electronic Arts shares is about $144, according to Visible Alpha, making Oppenheimer one of the bigger bulls on the Street.
• EA stock plunged earlier this year, but it's trading about flat for the year now. The company will report its full-year and fourth-quarter earnings on May 6th.

After plummeting in the first half of this year, shares of video game maker Electronic Arts have recovered.

EA’s shares closed Friday at a little under $147 after Oppenheimer analysts predicted that they would continue to rise. In a note published on Friday, the investment bank raised its target price to $170. This is higher than the Visible Alpha average for Wall Street analysts of $144. It’s also one of the most ambitious. The latest move leaves the shares roughly flat on the year. It marks a climb from January lows below $100, driven by an unsettling outlook.

Oppenheimer’s bullish outlook is partly attributed to the new Premium Pass for the EA Sports FC Franchise. An analyst wrote in a note that the firm expects this feature to “provide an incremental, multiyear bookings growth headwind previously unknown by investors.” 

Analysts say the pass has been a successful monetization tool for games like Fortnite and Call of Duty. It also works well with Valorant and Overwatch 2 because it is often incremental compared to other monetization tools, such as premium in-game goods.

Oppenheimer stated that its bullish estimates could prove to be excessive if the console refresh cycle fails to meet expectations in the coming years, if sales for older games decline at a faster rate than the growth of their replacements or if EA cannot continue to manage operating expenses tightly.

“While EA enjoys a successful evergreen Future growth of properties such as Madden NFL or FIFA will be negatively affected if consumer perceptions of microtransactions turn negative,” the report stated.

Microtransactions, or electronic transactions, allow gamers to purchase items in-game such as currency and lootboxes and tip other players. Microtransactions are the main source of revenue for newer platforms like Fortnite.

EA is behind some of the most popular video game franchises including Battlefield, EA Sports and The Sims. The company is expected report its fourth-quarter and annual earnings on May 6th.