Electronic Arts Analyst Stays Neutral Ahead Of Q4 Report, Says Upcoming 'Star Wars' Title 'Pivotal'

Electronic Arts Inc. EA stock has struggled as the video game maker's fourth-quarter report approaches Tuesday, and general investor concern is permeating the market in the wake of President Donald Trump's Twitter threats on trade with China.

Buckingham Research is staying neutral ahead of the print despite buzz around possible future growth in EA's "Apex Legends" game in China.

The Analyst

Matthew Harrigan maintained a Neutral rating on Electronic Arts with a $103 price target. 

The Thesis

Stocks plunged Monday morning after Trump’s tweets appeared to signal that trade talks with China had broken down.

The president tweeted that the United States would increase tariffs on $200 billion worth of goods, leading to fears of all-out trade war.

Harrigan said there would likely be a continued sell-off of EA stock Monday around the broader market fears; the stock was in the green at the time of publication. (See his track record here.) 

The stock's negative price action Friday was “unwarranted," the analyst said. 

The negativity could create an opportunity, Harrigan said. Buckingham is sticking to its already conservative estimate of about $400 million in incremental sales, he said. 

The China talk shouldn’t be too problematic overall, the analyst said. 

“Although China is a major growth opportunity for EA off possibilities such as 'Apex Legends' distribution with Tencent … Greater China represents only about 3 percent of EA's current top line." 

Harrigan is looking to the November release of a new "Star Wars" franchise game from EA.

“Despite negative market talk last Friday, we continue to regard the November 2019 'Jedi: Fallen Order' release as pivotal to EA in fostering a more creative decentralized approach, even though the game from EA's Respawn will have de minimis recurring revenue given the absence of a multi-player mode and absence of microtransactions." 

Price Action

Electronic Arts shares were trading higher by 1.43 percent at $93.82 at the time of publication Monday. 

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Photo courtesy of Electronic Arts.