BMO Capital Markets: Electronic Arts Makes 'Solid Entry' Into Battle Royale

Electronic Arts Inc. EA continued to recover Friday after the firm reported a third-quarter sales miss and lowered its annual guidance earlier this week. While the performance led many investors to pause, one analyst stayed in the game.

The Analyst 

BMO Capital Markets analyst Gerrick Johnson maintained an Outperform rating on Electronic Arts and cut the price target from $110 to $96.

The Thesis

While the video game developer's earnings per share exceeded the outlook, the company conceded difficulties throughout the quarter, with underperformance in both mobile games and “Battlefield V.”

Investors will soon be able to look past the unimpressive results, Johnson said in a Thursday note. 

“The immediate success of the surprise launch of ‘Apex Legends’ from EA's Respawn might end up being more important to the stock over the long term than guidance for a lackluster Q4,” the analyst said. “EA now has a solid entry into the battle royale genre that is generating a lot of buzz and dominating Twitch viewership since release.”

"Apex Legends," which earned more than 3.5 million unique players in its first 24 hours, has recently led all other games in Twitch viewership with about 300,000 viewers at any time.

Johnson also expressed confidence in the firm’s waning esports segment.

“We think sports games are staples that people come back to, and we expect them to regain momentum as we cycle through the competitive holiday season as well as 'Fortnite' mania." 

Price Action

Electronic Arts shares were up 12.57 percent at $94.67 at the time of publication Friday. 

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Photo courtesy of Electronic Arts.