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TheStreet Open House

Why Electronic Arts (EA) Stock Is Gaining Today

Stocks in this article: EABHE

NEW YORK (TheStreet) -- Electronic Arts (EA) shares are up 0.6% to $36.27 on Thursday, continuing the momentum it gained from its first quarter earnings beat on Tuesday.

Three different analysts firms changed their rating on the video game company today, with analysts at S&P Capital and Eva Dimensions upgrading the stock to "hold" from "sell".

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Analysts at Benchmark  (BHE) downgraded the stock to "hold" from "buy" while raising its price target to $41.82 from $41.01.

In separate news, the launch of the company's highly anticipated Battlefield game has been pushed back to early 2015, meaning that it will miss this year's holiday season.

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 some important positives, 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 revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income, good cash flow from operations and solid stock price performance. 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:

  • The revenue growth came in higher than the industry average of 11.0%. Since the same quarter one year prior, revenues rose by 27.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • EA's debt-to-equity ratio is very low at 0.22 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 1.42, which illustrates the ability to avoid short-term cash problems.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 50.9% when compared to the same quarter one year prior, rising from $222.00 million to $335.00 million.
  • Net operating cash flow has significantly increased by 101.61% to $4.00 million when compared to the same quarter last year. In addition, ELECTRONIC ARTS INC has also vastly surpassed the industry average cash flow growth rate of 39.74%.
  • Powered by its strong earnings growth of 46.47% and other important driving factors, this stock has surged by 60.01% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • You can view the full analysis from the report here: EA Ratings Report

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