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TheStreet Open House

Why Electronic Arts (EA) Stock Is Gaining Today

NEW YORK (TheStreet) -- Shares of Electronic Arts Inc. (EA) are up 3.24% to  after Wedbush Securities said it expects the video game publisher to beat estimates when it reports first quarter results, driven by sales of the high profile game, "Titanfall."

Wedbush also reiterated an "outperform" rating and $43 price target and added that strong TV ratings for the World Cup helped drive higher than average sales of the "2014 World Cup: Brazil" video game title, which had been impacted by mediocre reviews.

Must Read: Warren Buffett's 25 Favorite Growth Stocks

Separately, TheStreet Ratings team rates ELECTRONIC ARTS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ELECTRONIC ARTS INC (EA) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 50.00% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Software industry average. The net income increased by 13.6% when compared to the same quarter one year prior, going from $323.00 million to $367.00 million.
  • EA's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.13, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for ELECTRONIC ARTS INC is currently very high, coming in at 84.24%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 32.68% is above that of the industry average.
  • Net operating cash flow has increased to $281.00 million or 20.60% when compared to the same quarter last year. In addition, ELECTRONIC ARTS INC has also modestly surpassed the industry average cash flow growth rate of 10.73%.
  • You can view the full analysis from the report here: EA Ratings Report
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