Electronic Arts (EA) Stock Climbing on Analyst Upgrade

NEW YORK (TheStreet) -- Shares of Electronic Arts (EA) are climbing 2% to $67.91 in Wednesday's pre-market trading after analysts at Jefferies today upgraded the company to 'buy' from 'hold' and raised its price target to $80 from $58.

Electronic Arts makes game software content and online services for video game consoles, Internet-connected consoles, personal computers, mobile phones, and tablets worldwide.

The firm cited faster than expected console sales and the transition to higher-margin digital revenue. Some of the console games include FIFA, Madden, Battlefield, and Star Wars.

"On top of this, EA's multi-year game pipeline looks the best we've ever seen, starting this holiday with Star Wars Battlefront," analysts added.

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

"We rate ELECTRONIC ARTS INC (EA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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, notable return on equity, solid stock price performance and increase in net income. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

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

  • The revenue growth came in higher than the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 5.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • EA's debt-to-equity ratio is very low at 0.21 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 1.23, which illustrates the ability to avoid short-term cash problems.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Software industry and the overall market, ELECTRONIC ARTS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 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 75.69% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, EA should continue to move higher despite the fact that it has already enjoyed a very nice gain 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 7.6% when compared to the same quarter one year prior, going from $367.00 million to $395.00 million.
  • You can view the full analysis from the report here: EA Ratings Report

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