NEW YORK (TheStreet) -- Shares of Electronic Arts (EA) closed up 5.41% at $45.99 after CFO Blake Jorgensen said the company was reaching its previously-outlined 20% operating margin goal well ahead of time with "further runway ahead", according to Credit Suisse, who hosted the video game software company at their Annual Technology Conference yesterday.
Jorgensen indicated that further opportunities remain from "a confluence of continued gross margin expansion from the mix shift to digital downloads, as well as additional cost cutting to be realized from refocusing the marketing mix towards online channels," analysts said.
"We come away increasingly convinced in our long-term investment thesis as EA reiterated its intent to redeploy the playbook for FIFA to its other key franchises in terms of a shift away from physical disk sales and into multiple product lines (free to play, mobile, live services)," Credit Suisse analysts added.
Additionally, Dave Madden, a senior vice president at Electronic Arts' mobile games division, said he believes that mobile gaming will be the "single largest advertising platform in the world," according to Venture Beat.
EA shares traded on heavy volume today with about 7.33 million shares changing hands by the market close in New York, compared to the average of 3.89 million.
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 several positive factors, 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 26.7%. 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 93.96% 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 11.31%.
- You can view the full analysis from the report here: EA Ratings Report