Story updated at 9:55 a.m. to reflect market activity.
Shares of EA were gaining 1.5% to $42 n morning trading.
The analyst firm set a price target of $48 for the video game publisher.
Analyst Christopher D. Merwin expects digital revenue to make up 53% of EA's total revenue in full year 2015, up from 44% in full year 2013. The analyst cites the Ultimate Team feature in the publisher's core franchises including FIFA and Madden as a driving force in digital revenue that increases engagement and monetization in those games.
"EA has been proactive in adding new, high-margin digital revenue streams, while simultaneously cutting costs and rationalizing its product pipeline to drive margin expansion," Merwin wrote. "Most importantly, we believe digital content, like live services, is helping EA to increase the engagement levels of its player-base, a trend that should improve revenue visibility for EA's core titles and eventually transform the console-game publishing business into a higher multiple subscription model with less volatility."
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 revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, compelling growth in net income and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 28.1%. Since the same quarter one year prior, revenues rose by 42.4%. 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 1.35, which illustrates the ability to avoid short-term cash problems.
- Powered by its strong earnings growth of 101.12% and other important driving factors, this stock has surged by 56.88% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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 significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 101.1% when compared to the same quarter one year prior, rising from -$273.00 million to $3.00 million.
- Net operating cash flow has significantly increased by 3150.00% to $183.00 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 12.01%.
- You can view the full analysis from the report here: EA Ratings Report