Market Scan
EA's Long-Term Outlook Appears Strong
David Ng, 03.21.06, 11:39 AM ET
Electronic Arts
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Buying shares of Electronic Arts is an offer investors shouldn't refuse.
The video-game maker, which just released The Godfather: The Game, saw its shares rise close to 4% in Tuesday morning trading, with analysts voicing a generally positive outlook.
Merrill Lynch upgraded the company to "buy" from "neutral," saying the stock currently provides an attractive entry point.
The research firm said EA (nasdaq: ERTS - news - people ) is positioned to benefit from an improved console product cycle, thanks to the Sony (nyse: SNE - news - people ) Playstation 3, scheduled for November release, and stronger April sales of the Microsoft (nasdaq: MSFT - news - people ) Xbox 360.
While EA's near-term earnings look pressured, Merrill thinks fiscal 2008 promises to be more compelling for the company, with possible revenue growth of 20%.
Somewhat more guarded was Piper Jaffray, which reiterated a "marketperform" rating on EA.
"We view EA's near-term risk-reward profile as neutral," wrote analyst Anthony Gikas in a Tuesday report.
The Piper analyst said EA's sales growth will remain "challenging" as industry conditions continue to be soft for another 18 months.
However, long-term investors should add to positions at current levels, according to the analyst, because downside appears limited.
For fiscal 2007, the analyst lowered the earnings estimate on EA to $1 per share on revenue of $3.05 billion, from $1.10 per share on revenue of $3.145 billion.
"Our model adjustments are primarily related to reduced industry sales expectations," the analyst said.
In the near-term, the analyst believes EA shares will trade in the mid-$50s range. |
