EA) Immediately A Secure Haven?

Online game maker Digital Arts (NASDAQ: EA) reported their fiscal This fall earnings this week, and so they greater than justified the stubbornness seen of their shares in current weeks. Whereas fairness markets have bought off relentlessly throughout what is popping out to be one of many worst begins to a yr in residing reminiscence, shares of EA are ‘solely’ down about 20% from final yr’s excessive. 

If this was final yr, such efficiency could be catastrophic, however within the context of 2022 it’s fairly enticing actually. The S&P 500 index is down about the identical, whereas the tech-heavy NASDAQ index is down near 30% from its all time excessive. particular person names, Netflix (NASDAQ: NFLX) shares are down 75%, Fb (NASDAQ: FB) are down 50%, and Amazon (NASDAQ: AMZN) are down greater than 40%. You’d be forgiven for considering that possibly, simply possibly, online game shares are changing gold as the standard protected haven for fairness traders. 

Let’s check out their numbers and see what’s behind the bull’s stubbornness. 

Stable Report

For starters, the corporate’s EPS was a wholesome $0.80 and properly forward of what analysts had been anticipating. Income for the quarter was a bit of gentle on the consensus, however nonetheless up greater than 17% on the yr. Traders additionally discovered that the EA participant community grew 16% yr on yr to greater than 580 million distinctive energetic accounts. These are admirable progress numbers, notably as business numbers haven’t been nice this yr thus far.

Whereas online game gross sales boomed throughout COVID, because of extra individuals than ever earlier than being locked up at residence, they’ve been trending down since late final yr. Recent numbers this week confirmed that shopper videogame spending fell 8% within the first quarter in comparison with the identical interval in 2021, an “indicator of the comedown from mid-pandemic highs as some shopper {dollars} discovered their means again to different experiences, and the business continued to wrestle to get new consoles into patrons’ arms.”

So when EA continues to be in a position to push out a report like this, it’s simple to see why Wall Avenue nonetheless very a lot likes the reduce of their jib. Andrew Wilson, CEO of EA, spoke bullishly to the long run, saying that “FY22 was a document yr, with lots of of hundreds of thousands of gamers around the globe becoming a member of in our video games to play, watch, and create with each other. With wonderful video games, constructed round highly effective IP, made by extremely gifted groups, and excellent engagement in our stay companies, FY23 is ready to be a yr of innovation and progress for Digital Arts.”

The corporate’s CFO, Chris Suh, echoed the sentiment when he remarked that “we completed the yr with one other sturdy quarter of income and revenue progress, pushed by our stay companies enterprise which was 85% of our internet bookings in This fall. We have now a powerful basis of deeply engaged gamers, wealthy IP, and a resilient enterprise mannequin, which we’ll proceed to spend money on to ship progress in FY23 and past.”

Getting Concerned

Along with all of this, administration gave a bullish sign to traders this week once they upped the corporate’s dividend by 12%. This is without doubt one of the most bullish alerts traders can get, and tells us that administration could be very assured concerning the firm’s prospects within the months forward. The sturdy report and dividend hike didn’t go unnoticed both. MoffettNathanson upgraded their score on EA inventory to Purchase from Impartial, and set its value goal to $141. From the $120 that shares closed at on Thursday, this nonetheless suggests an upside of some 16% available. The crew over at Jefferies reiterated their Purchase score, whereas noting their shock at a rise in full-year steerage amid the sector pressures proper now. 

Wedbush saved its Outperform score as properly, however trimmed its goal to $164. The quarter was in keeping with his expectations, analyst Michael Pachter says, however “we anticipate progress within the foreseeable future pushed by value self-discipline, digital gross sales progress, a number of key franchises, and a number of current acquisitions.” Credit score Suisse made an analogous transfer, trimming its value goal to $162, suggesting there’s 30% upside available from present ranges. 

It’s a troublesome time to be an fairness investor proper now, however EA might simply be one of many higher locations to park your money proper now.