Electronic Arts (NASDAQ:) appears poised to continue seeing growth despite the easing of lockdown restrictions.

This company is well-known for developing and publishing video games and its Battlefield and sports franchises. It is priced around 19.3 times the earnings for next year, which seems to be reasonable.

We remain neutral in short-term as the company’s stock price is dipping. (See Electronic Arts stock charts on TipRanks)

Growth Catalysts

Electronic Arts (EA) operates in the gaming industry, which was valued at $173.7 billion in 2020. This industry is projected to expand at a 9.64% CAGR between 2021 & 2026.

The potential industry tailwind lies in the expansion of the esports marketplace, which is predicted to expand at a rate of 24.4% between 2027 and 2020. Online gaming has become more accessible due to the growing availability of internet at high speeds in emerging countries.

Electronic Arts’ Battlefield 2042 will serve as a catalyst for company growth in the near term. Battlefield has been a major franchise for Electronic Arts. Battlefield 5 was considered a failure.

Battlefield 2042 is attracting positive reviews from the gaming world based upon the like-to–dislike ratios in its YouTube trailers.

They are so focused on making this game successful that they chose not to add a campaign. Instead they focused their energies on the best online gameplay.

Risks

Like anything, Electronic Arts comes with risks. Battlefield 2042’s failure is one of the biggest risks. Battlefield 5 has made a remarkable comeback over recent months.

After initially flopping, the game has seen a number of updates that have seemed to revive it. The developers need to have a clear understanding of the players’ expectations for Battlefield 2042.

Battlefield 2042’s release date has now been moved to November. Activision Blizzard (NASDAQ) will be the first to sell Call of Duty, meaning gamers can get it before everyone else. Electronic Arts sales could be affected by this. Battlefield is not the only title the company owns. It is possible that one of the company’s new products will fail.

Wall Street’s Take

Turning to Wall Street, Electronic Arts has a Strong Buy consensus rating, based on 17 Buys, and four Holds assigned in the past three months. The average Electronic Arts price target of $171.82 implies 35.2% upside potential.

Final Thoughts

Electronic Arts is a company with many great franchises. It appears the launch of Battlefield 2, which will be available in November, is a success.

But, it is possible that the stock’s upward trend may begin to reverse. We would therefore wait and see if the stock is at a lower price before we enter a position.

Stock Bros Research didn’t hold any position at publication in the securities discussed in this article.

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