November 28, 2022

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Stock Week Ahead: Electronic Arts is still the odd gaming company

Stock Week Ahead: Electronic Arts is still the odd gaming company

A version of this story first appeared in the CNN Business “Before the Bell” newsletter. Not a subscriber? You can register over here.


New York
CNN Business

All things considered, video game leader Electronic Arts is having a good year despite inflation fears, recession fears, and other macroeconomic headwinds. EA stock

(EA)
It only decreased by 2% in 2022, which is a decline not as bad as rest of the technology sector, Which is now in bear market territory.

But there are concerns about the future of EA like Game Industry Integration.

Microsoft Xbox owner

(MSFT)
Underway Buy Activision Blizzard

(ATVI)
. Grand Theft Auto Maker Take-Two Interactive

(TTWO)
Zynga mobile game developer has already won.

Will EA be able to maintain its independence as its peers continue to grow? There is also growing competition from the likes of mobile game company metaverse Roblox And the fortnite Epic maker. Until Netflix

(NFLX)
threw his hat at Playground.

EA has a lot of profitable perks, such as long term Madden NFL GamesFamous Football Series (Coming Soon Check out the FIFA Brand), Apex Legends and many more games related to the Star Wars universe.

And there was a lot of talk about EA being a good acquisition target for tech and media companies with deep pockets like Apple

(AAPL)
Disney

(dis)
Comcast

(CMCSA)
or Amazon

(AMZN)
.

So will the EA finally be bought? The company was not immediately available for comment.

But EA is a grabber in its own right and could be looking for more deals, particularly one that could boost its mobile gaming division. EA made two such acquisitions in 2021, Glu for $2.4 billion and Playdemic (formerly owned by CNN’s former parent AT&T.

(T)
) for $1.4 billion.

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Analysts at Goldman Sachs estimate there is about a 15% chance that EA itself will be acquired, “given the high levels of M&A activity within the video game space,” according to a recent report on the broader technology sector. It’s definitely a small chance, but it’s bigger than zero.

Analysts came to a potential buyout valuation of $190 per share, which “is consistent with recent video game transactions.” This is approximately 50% higher than the current EA share price.

However, EA has enough quality content to justify working on its own for the foreseeable future.

Wells Fargo analyst Brian Fitzgerald noted in a report after EA’s latest earnings release in May, that the “robust pipeline” (more games from EA Sports, as well as updates on The Sims, Lord of the Rings and Bioware franchises) as well as To ‘mobile hardware acceleration’ growth ‘were positives for the stock.

So EA may not need to sell itself to a bigger company to remain competitive in the video game world.

There is a clear lull in earnings season. Most major companies will announce their second-quarter results in mid-July. But some notable companies, including two Dow components, are about to announce results this week.

nike

(NKE)
It will announce its earnings after the closing bell on Monday. Shares of the athletic footwear and apparel giant are down nearly 35% this year.

The company reported strong results in March, but geopolitical concerns weighed on Nike shares. Analysts expect Nike to report a decline in sales and earnings per share this quarter. As Nike just announced it get out of Russia In light of the invasion of Ukraine.

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Walgreens

(WBA)
He will also announce results before the market opens on Thursday. Shares are down 20% this year, double the 10% decline in competition CVS

(CVS)
But not as bad as a drop of about 45% in Rite Aid

(rad)
.

The second year has been challenging for Walgreens CEO Rosalind Brewerwho took the top position in March 2021.

Veteran CEO, who had previous leadership roles at Walmart

(WMT)
And Starbucks

(SBUX)
deals with supply chain disruptions and concerns about a slowing economy and weak consumer demand – a problem facing all retailers. Wall Street expects revenue and net income to be lower than last year.

Monday: US durable goods orders; pending home sales in the United States; Earnings from Nike, Jeffreys

(JEF)
and Trip.com

(crumpled)

Tuesday: US Consumer Confidence

Wednesday: General Mills earnings

(GIS)
McCormick

(MKC)
bed bath behind

(BBBY)
Paychex

(paying off)
And Patterson

Favorite

Thursday: end of the second quarter. US weekly unemployment claims; Inflation of personal consumption expenditures in the United States; US personal income and spending; Earnings from Walgreens, Constellation Brands

(STZ)
and micron

(MU)

Friday: American Manufacturing ISM