EA Stock Surges On Earnings, Buyback News; Analysts Mixed

Electronics Arts stock was up nearly 16 percent to $18.09 today after yesterday's earnings report and news the company is planning to buy
Electronics Arts stock was up nearly 16 percent to $18.09 today after yesterday's earnings report and news the company is planning to buy back $600 million in stock to increase shareholder value. The Cowen Group's Doug Creutz thinks today's jump was due to a previously "excessively negative" take on the company from traders, but noted he "continue[s] to view the company's execution as uneven." Not everyone agreed with that take, though. "EA’s announced share repurchase plan over the next 18 months signals, in our view, increasing confidence by the board in EA’s turnaround, limiting downside risk in shares," said Lazard Capital Markets analyst Colin Sebastian. Sebastian cautioned, however, that he maintains concerns about EA's future retail performance, and about the company's margins in the quickly growing digital segment. Wedbush Morgan's Michael Pachter also predicts flat retail growth for EA in the coming fiscal year, though he sees $150 million of digital revenue growth buoying that number. The stock buyback could also add up to 10 cents of earnings per share to those that hold on to their stock, Pachter said. But Kaufman Bros.' Todd Mitchell actually lowered his earnings-per-share estimate for EA by 15 cents to $0.90 on the news, predicting slightly lower revenues for fiscal 2012 "driven by as yet unproven digital business model." Kauffman maintained its buy rating for the stock, but "a little less enthusiastically." Cowen's Creutz predicted a widely expected NFL lockout would be over quickly and have a minimal impact on EA's popular Madden franchise this year. This goes against EA's official, conservative planning assumption that there will be no season at all, though the company said it is "optimistic it can be better than that."

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