Market Overview

Why Recurring Revenue, Video Game Growth Make This Electronic Arts Analyst Bullish

Share:
Why Recurring Revenue, Video Game Growth Make This Electronic Arts Analyst Bullish

Electronic Arts Inc. (NASDAQ: EA) has continued to pivot toward annuity revenue streams, and the video game industry’s growth is accelerating rapidly, with higher lifetime value during the pandemic, according to Needham.

The Electronic Arts Analyst: Laura Martin maintained a Buy rating on Electronic Arts while raising the price target from $150 to $165.

The Electronic Arts Thesis: The shelter-in-place orders and absence of live sports have driven hours spent playing video games, resulting in record high playing times for the company’s "Sims 4," "Apex Legends," FIFA and Madden games, Martin said in a Tuesday note. (See her track record here.)

This trend is not limited to the near-term, and “post-pandemic engagement levels will remain elevated compared to January 2020 [pre-coronavirus] levels,” the analyst said. 

The time spent playing has a high correlation to in-game spending, which should boost the company’s results in fiscal 2021, “so long as shelter at home orders persist,” she said. 

The annual release of FIFA and Madden sports games represents an annuity stream business that has a well-established installed base of annual and predictable users, Martin said. 

This lowers the risk for Electronic Arts compared to its hit-driven video game competitors, while its hit titles and the ongoing shift toward digital downloads and uncapped in-game digital purchases provide upside, the analyst said. 

“Finally, we appreciate EA’s licensed IP strategy, which outsources its marketing costs to the sports leagues and film companies that own the underlying IP.”

EA Price Action: Shares of Electronic Arts were down 2.68% at $136.92 at last check Tuesday.

Related Links:

10 Biggest Price Target Changes For Tuesday

New High Score: Evolve ETFs CEO On Hitting $1B AUM And The Surging Video Games Sector

Latest Ratings for EA

DateFirmActionFromTo
Aug 2020NeedhamMaintainsBuy
Jul 2020UBSMaintainsBuy
Jul 2020Credit SuisseMaintainsOutperform

View More Analyst Ratings for EA
View the Latest Analyst Ratings

 

Related Articles (EA)

View Comments and Join the Discussion!

Posted-In: Laura Martin Needham video gamesAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
NKEBarclaysMaintains132.0
GILDRBC CapitalMaintains86.0
JBLCitigroupMaintains45.0
LOWOppenheimerDowngrades180.0
HDOppenheimerDowngrades305.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com