Bank Of America Stays On EA's Sidelines, Still Prefers Peers

Electronic Arts Inc. EA turned in above-consensus revenue and saw its stock rise on Wednesday, but Bank of America says its fiscal year outlook remains unchanged and is staying Neutral.

The Analyst

Bank of America’s Ryan Gee reiterated a Neutral rating on EA, raising the price target slightly from $100 to $102.

The Thesis

Gee noted EA’s Live Services revenue was up 12% year over year to $504 million, beating Street estimates, likely on stronger-than-expected performance of "FIFA" and "Sims 4." But the comps were easy, Gee said, and overall first-quarter results didn’t change Bank of America’s view on 2020.

Gee still sees better near-term upside for two other game companies, Take-Two Interactive Software, Inc. TTWO on the strength of its "Borderlands" game, and Activision Blizzard, Inc ATVI, which he believes has a strong mobile pipeline.

Despite its earnings beat, EA kept its fiscal 2020 outlook unchanged.

“Given negative sentiment into the print, results may drive a relief rally with a few less downside risks,” Gee wrote in a note. “’Apex’ remains a key sentiment driver and nothing in 1Q (or 2Q outlook) has changed (positively or negatively) our overall outlook for that game.”

Price Action

EA shares rose 4.4% on Wednesday to $92.50.

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