Electronic Arts

Electronic Arts Inc. EA reported strong Q4 earnings Tuesday and the stock reacted by jumping over 3 percent in the after hours market.

At Wednesday’s open, the stock continued its move higher and traded at $62.88, up 6.29 percent.

Wall Street analysts commented on the company’s results following the earnings release. Below are highlights along with current ratings and price targets.

Barclays - Overweight, $68 price target

“We believe many of the factors that drove earnings revisions throughout FY15 – live services revenue, digital downloads, & mobile gaming – should continue into FY16 and beyond. Despite a $250M FX headwind to revenue in FY16, we expect to see further upside to margins, which are not only hedged against FX but should benefit from double digit growth in high-margin revenue streams like extra content and digital downloads.”

Brean Capital - Buy, $66 price target

“We are staying close to guidance and look for revenue of $640 million and non-GAAP EPS of $0.01. Our revenue estimate assumes another 750,000 units of FIFA 15 and another 800,000 units of Battlefield: Hardline on strong attach rates to current-gen consoles. We expect digital to make up 80% of total revenue, up from 62% in the prior year. As a result, this should bring gross margin up to 75% from 70% in F1Q15. Gross profit gains should be cut by a 3% increase in total operating expense due to an additional week this quarter.”

Credit Suisse - Outperform, $75 price target

“The key takeaways for us were the continued signposts along the company's digital transition: 1) downloads for some of the games on the new consoles have now reached 20%, 2) FIFA Online 3 already contributing ~$10mm per quarter in China, 3) 53% growth in Ultimate Team business. And we note that Battlefield, Need for Speed, and other major franchises still await a full free-to-play transition and global expansion. We believe both 1QFY16 as well as the FY16 guidance are conservative – especially given the context that this contemplates 9-10mm units of Battlefront.”

MKM Partners - Neutral, $67 price target

“EA continues to execute on its key initiatives including strong digital revenue growth, improving gross margin and steady operating expense management. These efforts were quite evident in a sizable 4QFY15 outperformance. The company once again appears set up for another beat and raise year in FY16. Along those lines, we are raising our FY16 EPS to $2.90 (+16%) from $2.52, which is ahead of management's initial $2.75 (+10%) guidance (consensus was at $2.63). Our fair value is now $67 (20x FY16E EPS + cash), up from $54. Despite our higher valuation, the upside does not warrant a more positive investment recommendation.”

Wedbush - Outperform, $70 price target

EA’s sports franchises all carry license fees, but generate recurring revenues from game sales and revenue growth from the company’s Ultimate Team free-to-play business. Core franchises Need for Speed (returning in FY:16), Battlefield (returning in FY:17), Dragon Age, Mass Effect, The Sims, and Mirror’s Edge provide significant contribution without license fees. This balance allows EA to take extra time to polish franchises, as it did with Battlefield Hardline and Dragon Age in FY:15. As its owned intellectual properties grow as a percentage of revenue, EA should see continuing operating margin expansion.

Pacific Crest Securities - Sector Weight, no price target

“We are lowering our F2016 revenue estimate to $4.52 billion from $4.60 billion and raising our EPS estimate to $3.00 from $2.60. Given our new estimates, we think EA is fairly valued in low $60s. After EA's big run, we prefer ATVI and GME, but given the Star Wars catalyst, it could continue to be strong in the near term. The board also approved a $1 billion stock repurchase program to replace the previous two-year plan of $750 million with $356 million remaining, and that should add fuel to the fire. This represents an estimated return of 50% of forecasted free cash flow to shareholders over the next two years.”