Is The Force With Electronic Arts?

May 4, 2015

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In a report published this morning, Credit Suisse Analyst analyst Stephen Ju stressed that the main highlight of the upcoming Q4 earnings results for Electronic Arts Inc. (NASDAQ: EA) were not a top or bottom line figure necessarily.

Instead, Ju prioritized his focus on the 2016 guidance that should come out in Tuesday's report.

In Ju's note, he hones in on Star Wars Battlefront as his main "wildcard factor," with the game's November 17 release date approaching. For this title, Ju projects around 6 million units to be sold for the game. However, he admits that this is a conservative model right now, given two reasons:

The video game will be released a month prior to the December 18 release date of Star Wars: Episode VII – The Force Awakens.
Even the prior Star Wars Battlefront iteration generated sales of approximately 9 million units.

The fever pitch for this multi-generation franchise could propel momentum for the Star Wars Battlefront title. In an exclusive phone interview, Sterne Agee CRT analyst Arvind Bhatia agreed that the hype surrounding the franchise may drive sales higher.

Arvind projects around 10 million units sold for Star Wars Battlefront as a realistic number. Along with a higher sales figure for Battlefront, Arvind sees 24-30 percent margin expansion in the next three years. Regarding guidance for 2016, Arvind states, "the story is the same, if not better, with more products and successful game launches."

Near the end of his report, Ju said that he is raising his price target from $56 to $68 and maintaining an Outperform rating.

The $68 price target represents a potential upside of 20.37 percent compared to the current price of $58.90 as of mid-day trading.