EA stock lowest since 1999, but analysts keep faith in digital
Wedbush and Cowen believe digital business will carry Electronic Arts to far greater success
Electronic Arts' stock price has fallen to its lowest point since 1999 amidst concerns over future earnings and player retention for its flagship MMO The Old Republic.
The company closed the day's trading at $14.48 a share yesterday, a far cry from the $60 highs of 2005 and its lowest price in almost 13 years.
In its recent financial results, EA showed year-on-year revenue growth, but projected a dip for fiscal 2013. In addition, it revealed that The Old Republic now has 1.3 million subscribers; significantly lower than the 1.7 million claimed by John Riccitiello in March.
However, analyst firm Cowen And Company believes that the "negativity" around EA has "become significantly overdone," and expects the company's stock to outperform the market by 25 per cent over the next 12 months. Nevertheless, Cowen expects The Old Republic's subs-base to decline to just 1 million players by March 2013.
Both Cowen and fellow analysts Wedbush attribute the concern around EA's revenue guidance to earlier, higher estimates from the company's management. Despite The Old Republic's disappointing performance, both analysts remain positive on EA's future, largely due to its strong, growing digital business.
"We believe EA represents the best opportunity for investors to benefit from continued digital growth for the industry next year, as well as from a likely rebound in packaged goods sales next year," a statement from Wedbush read.
"Therefore, we recommend that investors continue to accumulate shares of EA while they trade at a significant discount to our price target.
"EA has suffered from management credibility problems in the past, and the reversal on revenue guidance will likely disillusion many investors... However, this time, we think that they are legitimately on track, and think that the company is positioned to deliver the kind of revenue and profit growth that will finally propel its shares significantly higher."