Bull of the Day: Electronic Arts (EA) - Bull of the Day
I was in the game a long time ago. Like years ago, on this one. Since I first picked up a Genesis controller and played the original NHL Hockey I was a big fan of today’s Bull of the Day, Electronic Arts (EA). I even had it as one of my stock picks in Momentum Trader. Unfortunately one of my mandates in the service is I avoid the risk of earnings reports. Good news for anyone holding through earnings is that Electronic Arts killed it.
For the quarter, revenue came in at $1.428 billion, well above guidance for $1.275 billion. Further, EPS came in at $1.22 whereas EA’s guidance for the quarter was 90 cents. This bullish quarter was enough to change EA’s full year guidance from a previously expected $4.175 billion to $4.253 billion and EPS up from $2.05 to $2.35 per share.
This really was the quarter where the next generation consoles made their way into people’s homes. Shortly after the initial launches of the Xbox One and Playstation 4, the consoles didn’t catch on like their manufacturers had expected. There wasn’t enough of a catalyst for gamers to transition from the previous generation of consoles. But as prices came down on both units and gaming graphics caught up, more and more gamers made the jump.
When you migrate to a new console you need to go back and buy new games. This migration helped spur demand for EA’s famous franchise titles such as FIFA, NHL, Madden NFL and Battlefield. Being the closet turbo-nerd that I am, I can tell you that some of these new titles are nothing short of epic. The game play is amazing and the graphics are spectacular. Of course, I’m a PC gamer myself so I’ve been buying EA games all along. I may even start up Titanfall once I finish up this article.
Electronic Arts has been a Zacks Rank #1 (Strong Buy) for several weeks now and sits atop the Toys/Game/Hobby industry that ranks in the Top 24% of our Zacks Industry Rank. A big part of the reason for the bullish stamp of approval from us is the recent earnings estimate revisions to the upside ahead of the earnings report we just saw. Two analysts raised their estimates for next year, pushing consensus up from $1.93 to $1.97. This year’s revisions were just as bullish with one analyst raising estimates and moving the Zacks Consensus up to $1.70. You can bet that with EA’s guidance coming in much higher for the current year that analysts are likely to revise to the upside ahead of Q4’s report in May.
Yesterday the reaction to the news was decidedly bullish with the stock up over 10% on the session. This really was just a continuation from a bullish pattern we’ve seen since the gap up following the Q2 numbers when the stock jumped to $39. Since then the stock has been locked in an uptrend along its 25 day moving average shifted by 5 days (25X5). The breakout above $50 on good volume during a down day in the market gives this stock a ton of relative strength and some strong technicals.
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