CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.1% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

EA takeover: Electronic Arts stock price buoyant despite Disney, Apple acquisition denial

By Joyanta Acharjee

15:08, 22 August 2022

The Electronic Arts logo shown on a smartphone
As Electronic Arts (EA) stock remains buoyant, how long can the videogame maker remain independent? – Photo: Shutterstock

With million-dollar video game franchises on its books and potential suitors circling amid industry consolidation, can Electronic Arts (EA) remain as a standalone games company?

EA stock has been trading up 0.2% over the past week. For the year to date, is down 3%.

Electronic Arts (EA) stock price

Founded in 1982 and headquartered in Redwood City, California, Electronic Arts (EA) develops, publishes and distributes videogames for console, PC, mobile and online platforms.

Slide showing EA's games portfolioElectronic Arts

EA’s prize videogame franchises include free-to-play online shooter Apex Legends and annual football title FIFA, which will be rebranded after the end of a lucrative licensing deal with the sport’s governing body.

“Longer-term, EA can outpace the video game industry by continuing to build upon its evergreen franchises and grow digital sales across all platforms, especially mobile which remains a key area of growth,” Wedbush Securities analyst Michael Pachter wrote in a recent research note.

What is your sentiment on EA?

132.82
Bullish
or
Bearish
Vote to see Traders sentiment!

Deals and takeovers

A batch of billion-dollar gaming deals have already taken place this year:

On an earnings call earlier this month, EA’s Wilson did not comment on takeover speculation but did underline the company’s standalone status.

“I would tell you, I think we are in an incredible position. We’re soon to be the largest stand-alone independent developer and publisher of interactive entertainment in the world.”

“In a world where gaming is becoming more important to the lives of Gen Z and Gen Alpha – who will be the leading generation in terms of consumption, entertainment for the future – I don't think we could be in a stronger position as a stand-alone company,” EA’s CEO said.

The financial press has been awash with rumours that a company such as Apple (AAPL), Disney (DIS) or Amazon (AMZN) might swoop in for EA. But with a market capitalization of almost $40bn, any deal for EA is going to be pricey.

Amazon (AMZN) stock price

Amazon already has an in-house games studio which released online multiplayer PC games such as New World and Lost Ark in the past year. Although not mainstream titles, a company as cash-rich as Amazon (which makes most of its revenue from its AWS cloud service) could beef up its rosters of titles with a potential acquisition of EA.

Screenshot from Amazon's New World online gameAmazon Games Studio

Would EA be a good fit for a company like Disney? Disney already has many different intellectual properties on its books such as Marvel Entertainment and the Star Wars franchise.

But Disney is committed to creating content on its Disney+ streaming service and is still carrying debt from its 2019 acquisition of Fox. A pivot into gaming could be media overreach for the company even though EA was the prior exclusive licence holder for Star Wars videogames.

Apple, with its focus on consumer electronics and streaming media, might not be a natural fit for a major games company. There are rumours that the Cupertino, California-headquartered company is moving into the electric vehicle space, with Bloomberg News recently reporting that it hired a key Lamborghini executive.

TSLA

175.31 Price
-2.440% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 0.26

WEEDca

11.66 Price
-10.320% 1D Chg, %
Long position overnight fee -0.0255%
Short position overnight fee 0.0036%
Overnight fee time 21:00 (UTC)
Spread 0.10

RDDT

49.39 Price
-13.870% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 0.34

COIN

266.50 Price
+2.730% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 1.54

An outsider could come in the form of NBCUniversal, the media and entertainment subsidiary of US cable giant Comcast (CMCSA).

Comcast (CMCSA) stock price

Comcast is the biggest broadcasting and cable TV company in the world by revenue and the largest home internet service provider in the United States.

In the spring, one media outlet reported that NBCUniversal had failed to reach a deal to buy EA and add it to its media portfolio, which includes Universal Studios.

Recent earnings

Slide showing key data from EA's recent earnings Electronic Arts

Earlier this month, EA reported net income of $1.11 per share on revenue of $1.77bn (£1.5bn, €1.8bn) with analysts expecting earnings of 89 cents on revenue of $1.26bn.

Bookings – revenue from in-game transactions – were up 22% to reach $7.478bn over the trailing 12 months.

“Despite the better-than-expected results, we believe that Battlefield 2042 remains a drag on top-line growth, an issue that we expect to persist through the year...Battlefield was not discussed at all, despite its status as the one of the firm’s premier franchises,” Morningstar analyst Neil Macker commented in a recent note.

Online first-person shooter Battlefield 2042 was launched late last year to reports of bugs, glitches and other player issues, sending EA stock down over 7% at the time.

The Battlefield franchise is 20 years old and was coded by Swedish game developer DICE.

"EA expects the [2022] mix to be more console/PC and less mobile which should help gross margins, but reiterated confidence in the guide. If no content slips we remain bullish for growth on the top and bottom line for the year," Jefferies analyst Andrew Uerkwitz wrote.

“We now expect total bookings growth of 7.7% year-on-year. We expect momentum in live services to help offset some of the pressure on margins from new mobile launches and increased developer headcount for upcoming titles,” UBS analyst John Hodulik wrote in a recent note.

Investors will get an update on the company when EA reports fiscal second-quarter earnings in November.

 

Markets in this article

AMZN
Amazon.com Inc (Extended Hours)
180.06 USD
-0.31 -0.170%
AAPL
Apple Inc (Extended Hours)
171.31 USD
-1.94 -1.120%
CMCSA
Comcast
43.41 USD
0.27 +0.630%
EA
Electronic Arts
132.82 USD
0.81 +0.610%
SNE
Sony
85.81 USD
-0.82 -0.950%

Rate this article

Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

Still looking for a broker you can trust?

Join the 580.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading