EA's had a rough time with its stock price down over 50 percent since November. The company is clearly still dealing with the turbulence surrounding its ongoing transition, but investors want results now. EA's board stands behind CEO John Riccitiello, and apparently so does Wedbush Securities, which issued a bullish report on the publisher following yesterday's fiscal report (which was about in-line with expectations).
"We remain incorrigibly positive on the EA story. Despite a relatively low number of packaged good releases this year, we expect EA to grow revenue and earnings, primarily due to unrivaled digital strength. 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," wrote Wedbush Securities analyst Michael Pachter in an investors note.
"Therefore, we recommend that investors continue to accumulate shares of EA while they trade at a significant discount to our price target."
Wedbush currently has a 12-month price target of $29 and a rating of "Outperform" for EA. The market is reacting positively to EA's fiscal news, which involved making Star Wars: The Old Republic free. EA's stock closed up almost six percent at $11.68.
Specifically on the Star Wars news, Pachter noted, "We believe the free-to-play option and lower retail price will combine to significantly increase the number of Star Wars players by the end of the year as the two largest barriers to entry for potential Star Wars gamers (apart from an appreciation for the franchise and PC gaming) have been significantly reduced or eliminated."
"We expect the network effect to augment the number of gamers further. In the long-term, we believe the adjustments will result in incremental revenue and earnings growth as high-margin Cartel Coin purchases by a much larger pool of gamers and additional advertising generate more revenue than was lost through declining subscription fees and the lower MSRP."
Ultimately, Pachter believes that Star Wars now has the potential to "attract at least 10 million MAUs indefinitely, with upside to perhaps 50 million." He added, "Thus, we believe that contribution from the model shift could be significant for years to come."