Video game giant Electronic Arts could be a stable place to hide for investors troubled by rising interest rates, according to MoffettNathanson. Analyst Clay Griffin upgraded shares of Electronic Arts to buy, saying in a Wednesday note to clients that Electronic Arts has several advantages including a clean balance sheet, stable free cash flow and a banner of healthy franchises in its business. "EA is set up pretty well to weather continued market volatility," Griffin wrote. "Rising rates are a drag on every financial asset, but with a significantly cheaper stock and relative advantages, we think EA is worthy of an upgrade to Buy." MoffettNathanson did trimmed its target price on the video game stock to $141 from $151, but that still implies 26% upside from Tuesday's close. Despite concerns that the video game company will face more competition after it stops producing its wildly popular FIFA video game, Griffin is not so worried about a challenge to EA's dominance. The analyst believes the soccer game EA produces starting next year, called the EA Sports FC game, will be durable even without the partnership with FIFA. "It's reasonable to think that the organization will look to another partner to stand up an alternative. But it'll be an uphill battle. Securing rights is one thing, albeit a nontrivial thing. Building a game that is demonstrably better than EA's (with decades of iterative experience) is another. Someone will need to do both to be successful," the note read. "A challenge to EA's dominance in football, if it ever comes, won't come until fall '23 at the very earliest. In the meantime, the franchise remains one of the most durable in the industry. Football is life, after all," the note continued. Shares of Electronic Arts jumped 3.6% in Wednesday premarket trading. —CNBC's Michael Bloom contributed to this report.
An Electronic Arts (EA) video game logo is seen at the Electronic Entertainment Expo
Lucy Nicholson | Reuters
Video game giant Electronic Arts could be a stable place to hide for investors troubled by rising interest rates, according to MoffettNathanson.
NEXT PRO TALK
Wed, Mar 22 2023 - 2:30am