Coronavirus Outbreak to Drive Electronic Arts Stock Higher
New York and California are in lockdown because of the coronavirus pandemic. The rest of the country will likely follow. This means plenty of time at home, looking for things to do. That’s where video game companies like Electronic Arts Inc. (NASDAQ:EA) come in.
The company is known for sports games like FIFA and Madden NFL, along with other popular titles like Star Wars, Sims, and Need for Speed. The problem for Electronic Arts was that the company needed to attract younger gamers who didn’t want to play old legacy games.
EA stock was previously battered by the incredible rise of Fortnite, a free online battle game by Epic Games, Inc. that got gamers addicted.
But while games like Fortnite remain a threat to Electronic Arts, the company has modified its gaming strategy to include more online games.
In response to Fortnite, Electronic Arts Inc. made a nice move and launched its own free online battle game called Apex Legend. That game was a success, attracting over 50 million online players in its first month. But more importantly, it indicated that Electronic Arts had to make changes.
EA now offers a video game subscription service that allows people to play unlimited games. That should help with adding customers.
Revenues to Ratchet Higher
Fundamentally, Electronic Arts has delivered. The company reported revenues of $4.9 billion in fiscal 2019 and is estimated to grow this by 4.9% to $5.2 billion in fiscal 2020. Revenues are then slated to rise to $5.4 billion in fiscal 2021. (Source: “Electronic Arts Inc. (EA),” Yahoo! Finance, last accessed March 20, 2020.)
The company’s balance sheet is strong, which is what you want to see during these difficult economic times. Electronic Arts has $1.2 billion of debt but holds $5.6 billion in cash.
EA Stock Holds & Is Heading Higher
While the S&P 500 is down by almost 30% this year and almost 20% year-over-year, Electronic Arts stock has outperformed, with a smaller decline of almost 20% and eight percent, respectively.
As of this writing, EA stock is holding above a key support level of $85.00 after dropping to $85.69 on March 16 and bouncing back.
Chart courtesy of StockCharts.com
Once things settle down a bit, Electronic Arts stock could move toward resistance at $100.00, followed by $107.00, $118.50, and its high of $151.26 in July 2018.
The bull thesis for EA stock is supported by the current stay-at-home lifestyle during the coronavirus outbreak, as well as the company’s launch of new hardware platforms on the horizon.
Electronic Arts Inc. should continue to do well with its legacy games and with its introduction of new services and online games.