Water-Logged And Getting Wetter Stock Of The Day: Electronic Arts (EA)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Electronic Arts ( EA) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Electronic Arts as such a stock due to the following factors:

  • EA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $105.0 million.
  • EA has traded 6.8 million shares today.
  • EA traded in a range 227.7% of the normal price range with a price range of $2.00.
  • EA traded below its daily resistance level (quality: 28 days, meaning that the stock is crossing a resistance level set by the last 28 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on EA:

Electronic Arts Inc. develops, markets, publishes, and distributes game software content and services for video game consoles, personal computers, mobile phones, tablets and electronic readers, and the Internet. EA has a PE ratio of 37.2. Currently there are 12 analysts that rate Electronic Arts a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Electronic Arts has been 4.3 million shares per day over the past 30 days. Electronic Arts has a market cap of $8.2 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.87 and a short float of 7.7% with 4.20 days to cover. Shares are up 82% year to date as of the close of trading on Thursday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Electronic Arts as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share and compelling growth in net income. However, as a counter to these strengths, we find that revenues have generally been declining.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 26.44% and other important driving factors, this stock has surged by 88.45% over the past year, outperforming the rise in the S&P 500 Index during the same period.
  • ELECTRONIC ARTS INC has improved earnings per share by 26.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ELECTRONIC ARTS INC increased its bottom line by earning $0.32 versus $0.21 in the prior year. This year, the market expects an improvement in earnings ($1.27 versus $0.32).
  • 49.21% is the gross profit margin for ELECTRONIC ARTS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -39.28% is in-line with the industry average.
  • EA, with its decline in revenue, slightly underperformed the industry average of 7.1%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Software industry and the overall market, ELECTRONIC ARTS INC's return on equity is below that of both the industry average and the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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