Of the 27 analysts tracking Electronic Arts (EA), 22 recommend “buy,” five recommend “hold,” and none recommend “sell.” Their 12-month average target of $111.96 for the stock implies a 21.0% upside from its current price. In comparison, Take-Two Interactive (TTWO), Activision Blizzard (ATVI), and Zynga (ZNGA) stocks are trading at 10.0%, 17.6%, and 17.0% discounts to analysts’ average targets, respectively.
EA’s forward PE multiple of 18.0x makes the stock seem a bit expensive considering the company’s expected earnings growth. Its earnings are expected to expand by 7.1% in 2020, 12.5% in 2021, and 9.2% in the next five years. If EA can beat these estimates, its stock could move higher.
Could EA’s stock move higher?
Gaming companies’ performance is cyclical in nature, as not every game release is a hit. However, EA has an enviable portfolio of games across genres to keep players interested.
Although EA is a major player in the gaming space, it is growing slowly compared with the overall industry. EA will likely be banking on its upcoming releases to drive revenue. It could also benefit from the growing eSports market. Gaming research company Newzoo expects eSports revenue to grow 26.7% year-over-year to $1.1 billion this year.