Shares of Electronic Arts (NASDAQ:EA) experienced a surge on Tuesday, following an upgrade from Bank of America (BofA) from 'Neutral' to 'Buy'. The bank cited unjustified discounted shares and positive early indicators for fiscal year 2024 as reasons for the upgrade, setting a new price target for EA shares at $150. This led to a 2.5% rise in EA's stock.
The upgraded rating comes amid the global success of EA SPORTS FC 24, a soccer game that saw over 11 million downloads in less than two weeks. The first-day user volume reached a substantial 2.2 million, which is anticipated to shape future financial predictions and guidance. BofA analysts argue that EA's current discounted price is unjustified given its near five-year low worth.
Despite EA shares being rangebound since January and the company facing weak fiscal year 2024 guidance, challenging comparisons for EA Sports FC post-World Cup, and significant rebranding, BofA analysts see an investment opportunity. They view EA's stock as undervalued and anticipate growth based on preliminary data from the EA Sports FC 24 launch and above-trend growth in the gaming market.
The bank expects upward revisions for fiscal year 2025 estimates due to the projected $293.15 billion global video game market by 2026. EA's largest franchises are set to benefit from expanding consumption modalities and a strong correlation between in-game spending and playtime.
This upgrade could represent a turning point for EA, signaling a broader shift in investor sentiment with potential ripple effects across the economy. EA's strategy of capitalizing on major events like the Women's World Cup and amplifying in-game participation strategies could secure its continued success.
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