Analyst: Buy Electronic Arts Stock on eSports Buzz

Most analysts are upbeat toward EA stock

Oct 5, 2018 at 9:46 AM
facebook twitter linkedin


Berenberg initiated coverage on Electronic Arts Inc. (NASDAQ:EA) with a "buy" rating and $145 price target -- a 27.2% premium to last night's close. The brokerage firm said it was "deeply excited" about the video game sector, citing e-sports as a positive catalyst for revenue growth. This bull note is offsetting news of rape allegations against EA-sponsored soccer star Cristiano Ronaldo, with the shares up 0.2% at $114.23.

Most analysts are already upbeat on Electronic Arts, with 17 maintaining a "buy" or better rating, compared to five that say the equity's a "hold" -- though Stifel recently pegged Activision Blizzard (ATVI) as its video game stock of choice. Plus, the average 12-month price target for EA sits all the way up at $141.15.

This optimism is seen in the options pits, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), EA's 10-day call/put volume ratio of 5.77 ranks in the 92nd annual percentile -- meaning calls have been bought to open over puts at a quicker-than-usual clip.

This bullishness doesn't seem warranted when looking at EA's technical backdrop, though. The stock has shed 25% since its mid-July record high of $151.28. What's more, the shares have been stuck below stiff resistance at their 320-day moving average since a late-August bear gap, with the 40-day trendline recently emerging as another ceiling. This puts Electronic Arts stock at risk for bearish backlash, which could pressure the equity even lower.

Grab your FREE Eternal Contrarian report!


 




 
Special Offers from Schaeffer's Trading Partners