Electronic Arts Stock Star Wars Slip Sparks Bearish Analyst Note

Options traders still prefer EA calls

Managing Editor
Dec 21, 2017 at 10:38 AM
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Shares of video game maker Electronic Arts Inc. (NASDAQ:EA) have struggled following last month's controversial release of "Star Wars: Battlefront II". Today, analysts are chiming in, with Cowen and Company issuing a price-target cut to $104 from $106. The brokerage firm also lowered its profit forecast for the 2018 fiscal year, citing enough negative impact "to more than offset any strength elsewhere in the model." Below, we will take a closer look at EA stock.

In reaction to today's bearish brokerage note, EA stock is currently down 0.2% to trade at $108.21. After touching a record high of $122.79 on Aug. 31, the security has shed 11% -- breaching long-term support atop its 200-day moving average in the process, which appears to be on the verge of forming a death cross with the 50-day trendline. Nevertheless, EA found its footing atop the 50-week moving average, which has served as a floor since May 2016. Despite these recent struggles, the equity is still up 37% year-to-date.

Options traders have been betting on a bounce for EA shares. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), EA boasts a 10-day call/put volume ratio of 5.36, which ranks 4 percentage points from an annual high. This indicates calls have been bought to open over puts at a faster-than-usual clip.

Digging deeper, the February 110 call is home to the largest open interest increase during the past 10 days, with over 26,000 contracts exchanged. Data from the major options exchanges confirms significant buy-to-open activity here. This indicates options traders are undeterred by the video game stock's recent struggles, and expect it to resume its quest for record highs in the new year.

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