Brean Capital: Electronic Arts Well Positioned For 2015, But Stock Could 'Pause' In Near Term

Todd Mitchell of Brean Capital reiterated a Buy rating on Electronic Arts Inc. (NYSE: EA) on Monday with a price target raised to $54 from a previous $43 due to a favorable outlook for the industry.

“Underlying fundamentals for the video game industry turned positive in 2014 for the first time in a long time,” Mitchell wrote. “The current generation of consoles has sold better than expected creating strong underlying demand for the third-party publishers.”

According to Mitchell, Electronic Arts will see positive comps from "FIFA" and "Madden" due to a high attach ratio to new consoles. In addition, the company will realize “substantial growth” in digital revenues which contain a higher margin profile.

Mitchell expects Electronic Arts to earn $2.10 per share in fiscal 2015 on $4.2 billion in revenue, both of which are above guidance. Looking forward to fiscal 2016, the analyst expects the company to earn $2.45 per share on revenue of $4.55 billion due to higher expectations for "Star Wars: Battlefront" and higher digital contributions from EA Sports titles.

However, Mitchell notes that shares of Electronic Arts have “benefited disproportionately” from investors who want exposure to the group, and that shares could “pause” in the near term. Nevertheless, any pullback in shares should result in investors becoming “aggressive.”