The gaming industry has always been lucrative, and it doesn’t look like it’s going to stop soon. It’s one part of the entertainment industry where consumers get to determine what/who they get to be. And as such, consumers are willing to pay a lot to have the chance to forge their identities. Electronic Arts Inc (Nasdaq: EA) is one of the biggest platforms that allow this.
What Happened
Source: EVG Kowalievska
Electronic Arts stock soared by as much as 10% in the last week. The reason, though, is only distantly related to the stock.
So what?
EA is a game developer with many popular game franchises in its books, including FIFA, The Sims, and Apex Legends.
After the acquisition of major game developers Activision Blizzard and Zynga by Microsoft and Take-Two Interactive respectively, analysts got into the game of guessing what gaming stock might announce an acquisition soon. Apparently, EA was one of these guesses, making the stock jump in anticipation.
While we’re not here to add to the endless stream of speculation whether the stock will be bought, we believe EA is doing fairly well and is worth taking a look at.
Electronic Arts was also busy in the acquisition market in 2021. It acquired Codemasters, a major car racing games developer. This acquisition exposes EA to one of the fastest-growing sports is in the world, Formula 1.
In addition to that, the company also moved to bolster its position on the mobile gaming landscape with the acquisition of Glu. You could argue that Glu would not be on the top of your list to buy if you were EA. But mobile gaming is one of the fastest-growing segments in video gaming, and EA is bound to be able to take advantage of it. Which makes this a decent acquisition.
What now?
Perhaps the question on the minds of potential investors is whether to buy EA. The simple and straightforward answer is this:
You can, as long as you’re not expecting huge returns from the stock short term. As you’ll soon see in the technical analysis section, the stock has had no resultant bullish or bearish movement since 2020.
Source: EA
In its balance sheet, however, the game maker has looked strong. It recorded its strongest Q2 in history in the fiscal year 2022. Net revenue racked up to $1.83 billion, beating its guidance of $1.78 billion. Its live services also grew to $1.12 billion.
Technical Analysis
For as far back as 18 months, EA has bounced up and down between the $122.5 – $125 support level and the $148 – $151.5 resistance level. A false breakout occurred below the support level in November 2020, but the price quickly returned within its support and resistance walls.
Going forward, our guess is as good as any about when the next breakout is going to be. We do know, however, that ranges like this are often opportunities for investors to add to their positions.
We did a review of another gaming stock if you need more options to pick from.
