Electronic Arts's most recent trend suggests a bullish bias. One trading opportunity on Electronic Arts is a Bull Put Spread using a strike $80.00 short put and a strike $70.00 long put offers a potential 8.58% return on risk over the next 30 calendar days. Maximum profit would be generated if the Bull Put Spread were to expire worthless, which would occur if the stock were above $80.00 by expiration. The full premium credit of $0.79 would be kept by the premium seller. The risk of $9.21 would be incurred if the stock dropped below the $70.00 long put strike price.
The 5-day moving average is moving up which suggests that the short-term momentum for Electronic Arts is bullish and the probability of a rise in share price is higher if the stock starts trending.
The 20-day moving average is moving up which suggests that the medium-term momentum for Electronic Arts is bullish.
The RSI indicator is at 73.88 level which suggests that the stock is neither overbought nor oversold at this time.
To learn how to execute such a strategy while accounting for risk and reward in the context of smart portfolio management, and see how to trade live with a successful professional trader, view more here
LATEST NEWS for Electronic Arts
7 Video Game Stocks on Steep Discount
Mon, 14 Jan 2019 20:47:14 +0000
Editor's note: This story was originally published in November 2018. It has since been updated and republished. While the author's opinions may have shifted, the longer-trend for video game stocks remains.
If you're looking for an investment sector that is very likely to rise higher, video game stocks are your ticket. The concept of the video game has evolved from nerdy niche to mass mainstream infiltration. Still, powerful fundamental tailwinds haven't prevented video game stocks from absorbing huge losses.
Indeed, anywhere you look, the major (and minor) indices are flashing red. The broader markets finished 2018 down 6.2%, and our own Dana Blankenhorn, in November 2018, stated bluntly "we're already in a bear market." Any contrarian analyst would be hard-pressed debating Blankenhorn on this issue as the volatility persists into 2019.
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I'm certainly not going to attempt it, especially if I'm looking at esports and gaming stocks. The video game as an investment vehicle is a platform that has profited many investors handsomely over the years. Unfortunately, the declines in video games and esports stocks over the past year have forced everyone to rethink their assessments.
I can't deny the obvious: This is a time when all market participants should strongly consider protective measures. We have many factors that are completely unrelated to video games but could end up roiling video game stocks. However, I'd also caution against overreactions. Recall that the Dow Jones lost double digits between late January and early February of 2018 …
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The point is to protect yourself from this violent storm, but also to realize that all storms eventually fade away, producing excellent deals only in hindsight. If you've got the nerve, here are seven video game stocks on serious discount.
Source: Dalvenjah via Flickr
### Sony (SNE)
When you think about the modern video game, you immediately think about Sony (NYSE:SNE). Admittedly, SNE stock has become a running joke within consumer-electronics circles for the underlying firm's other endeavors. For instance, its smartphone is nowhere near as popular as Apple's (NASDAQ:AAPL) iPhone, and it once ran a computer-monitor business.
But don't ever question SNE stock for its part in advancing the video game to the mainstream.
Its PlayStation console resonates deeply with consumers, and better yet, it keeps improving. Just a few days ago, Sony announced during the Consumer Electronics Show (CES) that the current-generation PlayStation 4 hit 91.6 million unit sales. More impressively, this tally occurred over roughly a five-year lifespan.
Of course, the markets don't typically respond to past achievements. What makes SNE stock so compelling for the video game industry is corporate synergy. Make fun of Sony all you want, you can't deny its vast entertainment portfolio. Management can easily leverage this for exclusive titles, which they do frequently for marquee brands.
Source: Shutterstock
### Microsoft (MSFT)
Every great organization has an equally great competitor. In the war of supremacy for the video game, we have two top console-makers: Sony and Microsoft (NASDAQ:MSFT). The rivalry between the two tech giants is no joke for many gaming enthusiasts.
Microsoft stopped reporting sales figures for its Xbox console, which understandably drew snide snickering, but estimates put it around the 40 million mark. Based on this, Sony is vastly outpacing Microsoft in the console wars. But that hasn't stopped MSFT stock from making significant gains in the markets.
Part of the reason is that in terms of graphics and gameplay capabilities, Microsoft has largely gone toe-to-toe with Sony. Additionally, the house that Bill Gates built features its own batch of attractive exclusive titles, including the ultra-popular "Halo" series. Naturally, this has encouraged long-term investors to pile in on MSFT stock.
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And while I'm a Sony guy, I think Microsoft offers better overall stability. Along with its video-game business, it has a virtual lockdown on PC operating systems and various pieces of professional software. Plus, MSFT stock pays a much higher dividend, which isn't something to ignore at this juncture.
Source: Shutterstock
### Nintendo (NTDOY)
In my opinion, and those of fellow gamers, the architect of today's video game is Nintendo (OTCMKTS:NTDOY). However, other video game stocks have captured investors' attention. Moreover, as a Japanese over-the-counter name, NTDOY stock doesn't always generate positive news.
That has proven especially true in 2018. Last year, NTDOY stock returned handsome monetary rewards for shareholders thanks to the Nintendo Switch. This spectacular console is actually a hybrid device. Nintendo designed the Switch primarily for home usage, but you can just as easily take it on the road. However, great news becomes old news quickly, and shares faltered.
Still, the scope of the damage seems excessive. Over the past year, NTDOY stock has dropped a staggering 30%. While further losses are not out of the question due to the overall market panic, the bears are overlooking the company's long-reaching brands. For instance, the "Mario Bros." franchise is gaming gold, which Nintendo can leverage for profitable synergies.
Source: Shutterstock
### Electronic Arts (EA)
For anybody who has picked up a video game in the last decade, chances are, you fed the Electronic Arts (NASDAQ:EA) cash cow. From developing games for the Commodore Amiga — does anybody remember that? — to driving the latest innovations in esports, EA stock is a mainstay within the industry.
That said, video game stocks have incurred horrific losses, and Electronic Arts was not spared in any way, shape or form. Since July 25, EA stock has hemorrhaged more than 43% of market value. Some of that was due to the poor outlook given in its first-quarter fiscal 2018 earnings report. But later losses stemmed from internal issues, such as the delayed launch for its heavily-anticipated video game Battlefield V.
I understand why investors are now hesitant on EA stock. A few months ago, I provided my analysis on the company's extreme volatility. That said, my ultimate take is that Electronic Arts suffers from fixable problems.
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Moreover, they leverage an enviable sports-licensing franchise. No matter what happens, throngs of gamers always eagerly await the latest iteration in the Madden or FIFA series. On the surface, such fandom seems irrational because the changes are minute. Still, the consumers are shelling out big bucks every year, so who am I to judge?
Source: Gamevil Inc. via Flickr
### Activision Blizzard (ATVI)
One of the biggest reasons why the video game industry has captured mainstream attention is the proliferation of the online shooter genre. And in this genre, no one does it better than Activision Blizzard (NASDAQ:ATVI).
Over the last few years, ATVI stock has skyrocketed based largely on its Call of Duty franchise. Rather than being shunned by the real heroes in uniform, our military forces embrace these games. Earlier last year, Activision announced that it donated more than $100,000 worth of Call of Duty games to the United Service Organizations, or USO.
However, like Electronic Arts, ATVI stock incurred heavy losses in the markets. Since the close of Oct. 1, Activision shares have tanked 40%. A major culprit is fierce competition, particularly from Epic Games' Fortnite.
In the long-term, though, ATVI stock looks very intriguing. Over a year-and-a-half of market gains was wiped out in less than two months' time. That's a little bit over the top considering that the company levers one of the most popular franchises among video stocks.
Source: Shutterstock
### Nvidia (NVDA)
Semiconductor firms like Nvidia (NASDAQ:NVDA) started to light up the markets in 2016, and that momentum continued into last year. Unfortunately, we learned a physics lesson with NVDA stock: what goes up must come down.
And shares are doing exactly that. What appeared to be a promising start for 2018 turned into a veritable nightmare. Between the January opener and the end of September, NVDA stock gained nearly 44%. Since the beginning of October, however, the company has tumbled over 48%, finishing the year down 31%.
As a leader in advanced technologies, Nvidia took the brunt of the sector fallout. The geopolitical wrangling between the U.S. and China isn't helping matters. Plus, the severe plummeting in bitcoin prices is likely to negatively impact its crypto-mining-specific graphics processing units, or GPUs.
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Nevertheless, I really like NVDA stock, especially at these prices. I'm not the only one, as notorious short-sellers Citron Research just recently reversed their bearish take on the company. While you shouldn't rush in simply based on one expert opinion, Nvidia offers exposure to multiple next-gen businesses. I doubt that NVDA will stay deflated for long.
Source: Shutterstock
### GameStop (GME)
In following with my usual routine of sticking speculative names in the back, I bring to you GameStop (NYSE:GME). GME stock is easily one of the riskiest investments among video game stocks. The company pays out a near-10% dividend, which tells you all you need to know.
The other reason that GME stock is down — aside from all the terrible factors that slammed valuations — is related to its PR crisis. Many gamers hate GameStop because the retailer rips off customers who are looking to trade in their games and paraphernalia.
That's true, but at the same time, you can't have it both ways. The reason why other gamers love GameStop is due to their extensive library of preowned products. In my opinion, it's far superior to online sales and subscription-based services due to its easy return policy: if you don't like a particular video game, just return it.
This return policy is a major but underappreciated benefit for GME stock because many gamers are young. They (or their parents) may not have the funds for subscription services. GameStop gives these customers better pricing and superior flexibility.
As of this writing, Josh Enomoto was long SNE and bitcoin.
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Positive Secular Trends Imply Big Upside For Electronic Arts Stock
Mon, 14 Jan 2019 10:16:34 +0000
Once among the highest-flying stocks in the market, shares of video game publishers Electronic Arts (NASDAQ:EA), Take Two Interactive (NASDAQ:TTWO), and Activision (NASDAQ:ATVI) have all fallen off a cliff over the past several months. All three stocks peaked in mid-to-late 2018. Since peaking, TTWO stock has dropped 20%, while both EA stock and ATVI stock have fallen a whopping 40%.
Across the board, the bull thesis looks compelling for video game stocks here. Near-term headwinds blown by disappointing back-half 2018 sales are legitimate but overstated and have been overpriced into these stocks. The much broader and more powerful multi-year trends at play here, including deeper digital adoption, a steady rise in micro-transactions, and the mainstream emergence of eSports, remain favorable.
To be sure, those near-term headwinds will inevitably phase out. They will be replaced by favorable multi-year trends. This transition will ultimately push video game stocks way higher.
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This is especially true for EA stock. Electronic Arts stock has dropped 40% since July. Since then, there's been some negative holiday sales reads regarding two of the company's headline titles, Battlefield and FIFA. Meanwhile, there's some concern about margins getting hit next year due to licensing fees related to a new Star Wars game.
But, again, these are all near-term headwinds. In the big picture, thanks to a robust content portfolio, the games maker has broad exposure to the three important multi-year trends in the video game industry. That broad exposure will ultimately boost EA stock the medium-to-long term as the more immediate headwinds are replaced by favorable multi-year growth trends.
### Near-Term Headwinds Are Legitimate
To be sure, the headwinds weighing on EA stock are very real.
The consensus read from analysts is that gamers have not engaged with FIFA 19 ever since its debut in late 2018, despite being the number two video game sold globally in 2018. Other titles have been weak, too. A glance at the list of top video games from 2018 will show you that games from Activision and Take-Two dominated the market. Both companies had headline launches in their core franchises, Call of Duty and Red Dead Redemption, respectively.
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Electronic Arts didn't really have a big game last year. Outside of FIFA 19, EA's showing in 2018 was relatively weak. That contributed to a down-guide in late October, and that guidance has weighed on shares ever since.
### Long-Term Tailwinds Are Far More Powerful
Weak sales performance in the back half of 2018 is a very small deal in the big picture for EA stock. In that big picture, there are three multi-year trends in the video game industry that matter:
* Increased digital download adoption and the eventual birth of video game streaming.
* Continued growth in video game micro-transactions and live services.
* Mainstream emergence and widespread adoption of eSports.
Thanks to certain growth initiatives and a robust content portfolio that includes franchises like Battlefield, FIFA, Madden, Star Wars, and Sims, EA has broad and favorable exposure to all three of these growth trends. For example:
* Through Project Atlas, EA is arguably the leader in pioneering what the company calls "cloud gaming", which is essentially video game streaming (being able to play a video game through a streaming service, not through a console).
* Many of EA's games lend themselves to micro-transactions. These micro-transactions aren't going anywhere anytime soon. While Battlefield V launched without micro-transactions, rumors are swirling that a premium Battlefield V currency is coming in January. The broad implication is that the era of micro-transactions will live on for EA.
* EA's titles lend themselves well to competitive gaming. As such, EA hosts multiple eSports events, including the FIFA eWorld Cup, Madden NFL Championships, and NHL Gaming World Championships. EA is also plunging into the mobile eSports world with Command & Conquer: Rivals.
Overall, the big picture fundamentals supporting EA stock remain favorable. While there are near-term headwinds related to sales strength in the back half of 2018, those headwinds are ephemeral. They will leave just as quickly as they arrived.
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As noted above, the important things will stay in the picture. EA will continue to push forward on cloud gaming and benefit from digital downloads. The company will continue to earn higher revenues and grow margins through micro-transactions. And, Electronic Arts will also continue to expand its eSports presence.
All three of those things are positive long term developments that will ultimately drive EA stock higher.
### The Price Is Right
At current levels, the price is right to buy EA stock.
High margins, strong cash flows, a wide content moat with enduring demand, and favorable multi-year trends have kept EA stock trading at a 23x forward earnings multiple over the past five years. However, the past 12 months have seen the forward earnings multiple spend most of the time above 25x.
Today, EA stock's forward earnings multiple is below 20x. That's an unnecessarily big discount. Margins are still high. Cash flows are still strong. The content moat is still wide. And the multi-year growth trends remain favorable. Thus, a rebound to a 25x forward multiple seems reasonable. Alongside continued earnings growth, that should power big gains in Electronic Arts stock.
### Bottom Line on EA Stock
EA stock has been unnecessarily beaten up on overstated near-term headwinds that will inevitably fade from the picture within the next few months. As they do, Electronic Arts stock should rebound, given strong longer-term fundamentals. This rebound will be powered by both earnings growth and multiple expansion, giving the stock double firepower to head way higher in 2019.
As of this writing, Luke Lango was long EA, TTWO, and ATVI.
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7 Stocks to Buy That Are Ready for Takeoff
Fri, 11 Jan 2019 17:12:55 +0000
Goldman Sachs (NYSE:GS) believes what goes down must come up. At least that's the case for its 2019 list of 13 stocks to buy that it believes have the most potential upside in the year ahead.
To make Goldman's list, a company should have solid earnings, be undervalued based on those earnings and be ready to take off. The average loss in 2018 of the 13 stocks was 38.4% with only one company — Netflix (NASDAQ:NFLX) — delivering a positive return.
Consider this Goldman's version of the Dogs of the Dow.
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I liked the list of 13 stocks so much, I've decided to create my own list of stocks to buy that are ready to take off.
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To make my list, a company must have a market cap of $2 billion or more, an operating margin of 20% or higher, little or no debt, and a forward P/E less than 20.
Oh, and if possible, it should be in the S&P 500.
Source: Shutterstock
### BlackRock (BLK)
BlackRock (NYSE:BLK), the world's largest asset manager, didn't have a great year in 2018, generating a total return of -21.2%, almost five times worse than the S&P 500.
Asset managers as a group didn't do well in 2018, so if you own BLK shares, I wouldn't get too concerned because it's got an incredibly diverse set of revenue streams that include iShares, the world's biggest ETF provider. iShares accounted for 38% of the company's $10.9 billion in base fees in 2017 with retail providing another 31% and institutional investors the remainder.
Talk about diversification.
Interestingly, the Americas represents 65% of its revenue, with the Asia/Pacific region accounting for just 7% of almost $11 billion in fees. Given the growth of China and other markets in the APAC region, one can't help but with this disparity as a real opportunity for the company.
Generating $3.7 billion in free cash flow over the trailing 12 months, BlackRock is trading at 16.9 times cash flow, well below its five-year average of 23.1.
On top of all the financial numbers, you've Larry Fink as CEO, one of the most candid chief executives in finance.
I like its chances in 2019.
Source: Shutterstock
### Electronic Arts (EA)
Like BlackRock, Electronic Arts (NASDAQ:EA) didn't have a great year in 2018, generating a total return of -24.9%. However, like BlackRock, its industry didn't have a great year, either, so a bounce-back year could still be in the cards.
One troubling aspect of the video game industry for Electronic Arts in 2018 was the phenomenal success of "Fortnite," which allows users to download the game for free on your iPhone, Android phone and even game consoles such as Xbox and PlayStation.
Free games are definitely not helping EA's stock price.
However, in the case of Electronic Arts and the rest of the industry, it appears that investors have gotten ahead of themselves when it comes to the deterioration of the gaming industry.
"Six months ago the market thought of Electronic Arts as a company with $6 earnings per share power, trading at 25 times earnings, [which] makes it a $150 stock," Bernstein analyst Todd Juenger wrote in December. "Now the market is thinking more like $5 EPS power, trading at 17 times, for an $85 stock."
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The risk/reward ratio seems tilted in investors' favor at the moment, with the bad news seemingly more than baked into EA stock.
I like its upside in 2019.
Source: Shutterstock
### Facebook (FB)
If there's a stock that everyone's got an opinion on, I would guess Facebook (NASDAQ:FB) is at the top of the list.
Mark Zuckerberg and company had a terrible year in 2018 from a PR perspective. The entire privacy issue putting a real damper on FB stock, which delivered a total return of -25.7% this past year. That's the company's first calendar year with a negative total return since its IPO in 2012.
Not to worry. If you bought shares in Facebook's IPO and are still holding, you're up 332%, almost four times better than the S&P 500.
Some experts feel Facebook is in for more pain in the year ahead. JPMorgan (NYSE:JPM) isn't one of them. It has made FB one of its top stock picks for 2019.
"We view core FB as stickier than many think, with recent metrics mostly stable and our proprietary survey work showing solid engagement, while Instagram continues to grow rapidly," JPMorgan analyst Doug Anmuth wrote Jan. 8 in a note to clients. "We Expect Facebook To Climb The Wall Of Worry."
So do I.
Source: Shutterstock
### SVB Financial (SIVB)
By far my favorite American bank stock, SVB Financial (NASDAQ:SIVB), took a step back in 2018, generating a total return of -19% — its first year in negative territory since 2011.
Of course, 2018 wasn't a good year for most banks, large or small. Warren Buffett's biggest bank holding, Wells Fargo (NYSE:WFC), lost even more, down an additional 258 basis points. Given all the problems Wells Fargo faced in 2018, a similar performance for SIVB seems like a big slight, since I consider it the better of the two California-based banks.
While some analysts have lowered expectations for SIVB stock in recent weeks by cutting 12-month target prices, earnings estimates for 2019 over the past three months have improved by a dime to $20.58 a share.
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At the end of December, I suggested that SIVB's net interest margin of 3.6% in 2018, significantly higher than Bank of America (NYSE:BAC), was a big reason to like it.
If there's a bank stock to rebound in 2019, my bet's on SVB Financial.
Source: Shutterstock
### Cimarex Energy (XEC)
I'm loath to pick any oil-related stocks for this article, but it appears independent oil and gas company Cimarex Energy (NYSE:XEC) might make for a good exception. Losing almost half its value on a total-return basis in 2018, Cimarex is trading at 4.4 times cash flow and 10.2 times its forward earnings.
What's to like about Cimarex besides its valuation?
In November, the Denver-based company announced it would acquire Resolute Energy (NYSE:REN) for $1.6 billion including the assumption of $710 million in debt. Cimarex will pay for 60% of the acquisition cost ($900 million plus the debt) with stock and cash for the remainder.
"It is a perfect fit with our existing Reeves County position and will allow us to leverage our knowledge and deliver superior results over a broader asset base for the benefit of both Cimarex and Resolute shareholders," stated Cimarex CEO Thomas Jorden on Nov. 19. "The Resolute assets are expected to generate free cash flow in 2019, basically funding any additional development capital from the start."
Through the first nine months of fiscal 2018, Cimarex had $476 million in revenue, 49% higher than in the same period a year earlier. On the bottom line, its adjusted earnings per share were $5.39, 69% higher than a year earlier.
If you're looking for a mid-cap oil and gas stock to buy in 2019, Cimarex ought to be at the top of your list.
Source: Shutterstock
### InterDigital (IDCC)
InterDigital (NASDAQ:IDCC) is the first of two companies not in the S&P 500 that I've included in my list of stocks to buy that are ready to take off in 2019. IDCC owns a global portfolio of wireless technology patents that it licenses to other manufacturers.
I'll be the first to admit that when it comes to the tech industry, I'm a relative beginner beyond the basics, so I won't be giving you an in-depth examination why InterDigital's wireless and video technology patents are the best in the industry.
What I can say is that in the first nine months of 2018, IDCC had free cash flow (FCF) of $151 million, more than double the $71 million in FCF in 2017.
In addition to the significant increase in free cash, InterDigital's recurring revenue in Q3 2018 was $75 million, 11% higher than in the second quarter of 2018. On the bottom line, it had net income of $20.1 million, more than double its net income in Q2 2018.
What's exciting about InterDigital from a non-tech viewpoint is the company's $29.73 in cash per share it has on its balance sheet. At current prices, IDCC is trading at just 2.3 times cash.
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With InterDigital yielding 2% and expecting good things from the move to 5G, IDCC stock is a good stock to buy to get some income in the short term and capital appreciation in the long term when some of its patents start to pay dividends from licensing, etc.
This is definitely a company I want to get to know better.
Source: Stiller Beobachter via Flickr
### Louisiana-Pacific (LPX)
Louisiana-Pacific (NYSE:LPX) is a leading manufacturer of engineered-wood building products with 23 plants in the U.S., Canada, Chile, and Brazil.
Like most manufacturers that rely on the housing industry, business is great when new homes are getting built and existing owners are renovating their homes to boost the potential sale price down the road. In times when the housing market hits the skids, like 2008, companies like Louisiana-Pacific go through a rough patch.
Toward the end of 2018, cracks in the red-hot housing market started to reveal themselves, sending stocks of homebuilders for a big decline. That trickles down to the suppliers of the homebuilders like LP, which lost 13.4% in 2018, with much of it in the last three months of the year.
That said, there's nothing more valuable than a person's home, making Louisiana-Pacific's engineered wood an important commodity.
Currently trading at 5.9 times cash flow, one-third the S&P 500, LPX is a value stock that with a 2.2% yield and an operating margin that's better than it's ever been. Sure, there's a chance that the housing market will continue to slow, but there's an equal possibility that demand keeps going higher.
Besides, with $633 million or $4.40 a share in net cash on the balance sheet, this is a very stable stock to buy for 2019 and the long haul.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
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After Bungie Divorce, Activision Loses Wall Street’s Love
Fri, 11 Jan 2019 15:30:00 +0000
After Bungie Divorce, Activision Loses Wall Street’s Love
## Bungie
On January 10, in a regulatory filing, Activision Blizzard (ATVI) announced that Bungie will “assume full publishing rights and responsibilities for the Destiny franchise. Going forward, Bungie will own and develop the franchise.” Activision Blizzard said, “As a result, the company does not expect to recognize material revenue, operating income or operating loss from the Destiny franchise in 2019.”
## Wall Street analysts
Activision Blizzard opened sharply lower on January 11. As of 9:40 AM EST, Activision Blizzard has fallen 11.8%. Electronic Arts (EA) has fallen 0.86%, while the S&P 500 (SPY) has fallen 0.51%. Analysts turned bearish on Activision after the news. MKM Partners lowered Activision Blizzard’s fair value from $68 to $48. Benchmark lowered the stock’s target price from $93 to $87. On January 9, SunTrust Robinson lowered Electronic Arts’ target price from $116 to $105. The brokerage also lowered Activision Blizzard’s target price from $65 to $62.
## Other news
On January 10, Reuters reported that Blizzard Entertainment and NetEase extended their partnership in Mainland China. The 11-year partnership has been extended another four years. Earlier this year, Netflix (NFLX) hired Activision Blizzard’s ex-CFO Spencer Neumann. The gaming market in China has been rattled by slow progress on new game approvals. While China has approved games in two batches over the last two weeks, there weren’t any games from Tencent (TCEHY).
Why Electronic Arts (EA) Could Beat Earnings Estimates Again
Fri, 11 Jan 2019 15:10:03 +0000
Electronic Arts (EA) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.
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