Opinions David Burrows
Electronic Arts IncEATOP PICKJul 09, 2015
David BurrowsStock price when the opinion was issued
As of Jun 05, 2026. Market Open.
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Has a lot of sports franchises, lacking a single hit videogame. He likes its predictability. It has been offered a buyout, and will likely conclude the deal in Q2.
Martin Cobb, ASIP(Note the short timeframe.) Takeover bid of $210, which should settle in Q2.
Martin Cobb, ASIPThe space is doing fantastically well. Great franchises, an absolute money machine. There's a rule to buy software companies when growth + margins = 40 or more. For EA, this number is 94. July 29 report beat on top and bottom and raised guidance.
Kim Bolton(Note the short timeframe.) Chose it as a Top Pick because the price was depressed. The most utility-like of the video game companies. Weak on the mobile side. At some point, will probably be taken over, and at a premium.
Martin Cobb, ASIPThey have a lot of sports titles. They lost FIFA, but have their own soccer franchise, plus baseball and basketball. Sports are steady as opposed to companies depending on a few hit games. Ultimately, someone will buy them out, like Netflix or Amazon or Apple, who could pay twice the multiple.
Martin Cobb, ASIPLikes the portfolio, though a bit weak in mobile. Discretionary spend on some titles has been a bit lower. Over the long term, can grow 5-6%. 30% free cashflow margins, enough to buy back 5-6% of shares every year. In-game transactions are 99% gross margins. Yield is 0.6%.
(Analysts’ price target is $146.38)Martin Cobb, ASIP
This pick results from his looking at the application layer 12 months down the road. Model training algorithms are already being monetized in healthcare, education, and now sports/entertainment. Investor day last week saw a lot of AI tools. Yield is 0.5%.
12-month price target of $167.50. Buy 1/3 here around $141, $134, and $125.
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This company sells something that is not that expensive and that people get hours and hours of use out of, so there is a very good value proposition. They have the strongest franchise in video games by far. Have all of the big Madden football, FIFA soccer, etc. These are games that people renew almost every year. Right now the market is in the midst of a console transition to PlayStation 4 and Xbox 1. Historically the 3rd year of that transition is the strongest year and we are headed into that year. The market is moving to an online sales model, so people are buying these games and upgrades digitally as opposed to going into a store. This means the company gets a much better profit margin. They’ll generate close to $1 billion in cash in 2016. They are going to release the new Star Wars game. Initially said they were going to sell 1 million copies, but have now updated that to about 11.5 million copies.