MKM Sees EA As the 'Best Idea' For '16 In Media & Entertainment Group

MKM Partners issued an industry update on the Media and Entertainment space, giving their Outlook for 2016. Specifically, analysts said Electronic Arts Inc. EA is their top pick.

Analyst Eric Handler wrote, "Electronic Arts offers the most capital appreciation potential among its peers in 2016. The company should benefit from a strong release slate along with continued margin expansion, which has been fueled by steady gross margin improvement and declining operating expenses."

MKM Partners sees video games as the most attractive industry segment in the Media and entertainment space in 2016. This is because of strong expected game lineups and digital revenue streams, which should allow content makers to leverage existing technology and drive topline growth. Furthermore, as next generation hardware becomes more advanced, MKM believes that penetration of full game downloads may increase which could drive higher performance for firms in the video game space.

As MKM's top pick of 2016, analysts believe Electronic Arts has significant opportunities to expand EPS growth in the new year including mobile sales of popular game platforms and a deployment of excess cash which can be used either to pursue accretive acquisitions, issue a dividend, or repurchase shares to drive shareholder value.

Shares of Electronic Arts recently traded at $63.65, down 3 percent.