Shares of sporty video game firm Electronic Arts (EA) have been steadily gaining traction since bottoming out in mid-April. EA is one of those diversified video game pure-plays, with skin in the game (pardon the pun) of various parts of various corners of the market. From addictive, fun mobile games to competitive triple-A shooters and titles licensed on legendary franchises, EA seems to have all bases covered. With newfound momentum, a still-reasonable valuation, and unique football titles for this year, I’m inclined to stay bullish on the stock, just like most analysts covering the name.
Football (American football, not soccer) season is set to kick off in late summer. For EA Sports, its biggest seasonal catalyst (football games) has kicked off early. Early sales data suggests fans are willing to pay a bit more for early access and other perks included with pricier tiers of the game.
Undoubtedly, football season is a big deal for EA, and it could help lengthen the stock’s recent rally off year-to-date lows. Currently, EA stock is within striking distance (around 1.5%) from all-time highs not seen since February 2021, when we were all locked down from COVID-19, entertaining ourselves from the comfort and safety of our own homes.
Two Big Football Kick-Offs for EA This Year Could Boost the Stock
It’s not just Madden’s annual release that could help EA stock power its way to a long-awaited multi-year breakout. This year, EA Sports is bringing back its long-awaited college football franchise, which has been more than a decade in the making. EA College Football 25 has been met with profound demand, with more than 2.8 million early-access players (78.6% of which have paid for the game) getting into the game ahead of its release.
The kicker is that players had to pay for the $100 deluxe edition to play ahead of last week’s July 19, 2024 release. Indeed, the fans could not wait to pick up their controllers, and who can blame them? It’s been a long time since EA put out a college-flavored football game.
Clearly, the move to launch two football games this year (Madden NFL 25 and College Football 25) is a genius one that may finally set the stage for a multi-year breakout. For players interested in Madden and College Football, the MVP Bundle, which includes both games at a reduced price, seems like way too good of a deal to pass up.
As part of the deal, college players who had their likeness in the game will receive $600 and the game itself. Indeed, it’s not a life-changing sum by any stretch, but it has been taken well by the college football stars. Given the magnitude of sales the title has enjoyed already, I think it’s safe to say that EA is getting a fantastic deal.
It’s Not All About Football, Though
It’s hard not to be excited about EA’s return to college football and the impressive early sales numbers it’s been posting. To put it simply, EA College Football 25 has been a major touchdown for EA. And with Madden 25 just around the corner, it seems like EA is running the football toward the endzone at full speed. That said, EA needs more than just football to get its stock rally going into high gear.
Despite recent football success, a Citigroup (C) analyst named Jason Bazinet downgraded EA stock to Neutral from Buy, citing “weakness” in competitive shooter Apex Legends and macro-related spending, among other reasons. Bazinet makes some decent bearish points, but I think they’re just a bit overblown.
Undoubtedly, live-service games, such as Apex, which rely on frequent gameplay and content updates, are cash cows that have their ups and downs. Amid the battle for gamer engagement, it can be quite tough to keep users playing and spending money unless new content and events really hit the spot. Even new content additions are no guarantee of success, given the likelihood that some of the player base will eventually get tired of an aging title.
Despite the Apex weakness pointed out by Bazinet, I think it’s far too soon to say that the apex is already behind Apex Legends. New seasonal content could easily bring back a wave of new and old players.
However, next year, the battle for players will get markedly harder as Take-Two Interactive (TTWO) finally launches Grand Theft Auto VI, a title that’s sure to eat up a huge chunk of gamers’ playtime. In any case, EA stock looks primed for a 2024 breakout despite trading at a premium to industry peers.
Shares of EA trade at 19.9 times forward price-to-earnings (P/E), slightly ahead of the electronic gaming and multimedia industry average of 14.5 times. The higher price tag seems worthwhile, given the football strength and the ability to reinvigorate Apex Legends with its coming Season 22 and new Premium+ battle pass tier.
Is EA Stock a Buy, According to Analysts?
On TipRanks, EA stock comes in as a Strong Buy. Out of 16 analyst ratings, there are 10 Buys and six Hold recommendations. The average EA stock price target is $156.00, implying upside potential of 4.6%.
The Bottom Line on EA Stock
Football season has come early for EA this year. Amid impressive early sales figures, EA stock seems poised to continue its rally into the late summer. Additionally, the non-sports parts of the business look intriguing, with a new paid tier and slew of content coming to the next season of Apex Legends.
Though the battle for gamers will get more intense next year (think the GTA VI release), EA stock seems poised for continued upside going into year-end.
