EA shares hit all-time high as analysts raise industry targets

A number of games companies are making a strong showing on the stock markets following positive reports from key analysts - with Electronic Arts today hitting its highest share price of all time, and significant gains expected across the industry.

At time of writing, EA was trading at a record $76.50, a gain of around 5 per cent, while other leading publishers such as Activision, Take 2 and THQ were showing gains of up to 2 per cent.

The boost for the sector comes following improved outlooks from key analysts, who have raised their price targets and earnings estimates for a number of major publishers in the past few weeks.

Last week, Wedbrush Morgan analyst Michael Pachter raised his price target for Electronic Arts from $75 to $90, and also adjusted targets for Activision and THQ upwards, to $15 and $22.50 respectively.

This was followed by a report from US Bancorp Piper Jaffray analyst Tony Gikas, who also raised price targets for those companies, albeit slightly more conservatively - raising EA from $67 to $80, and bringing Activision and THQ to $13.50 and $20 respectively.

Gikas also improved his earnings estimates for EA, predicting that the company's earnings per share for the June quarter will be more than double his original estimate, at 5 cents rather than 2 cents. He estimates EA's revenues for the quarter at $349 million.

This may not just be a temporary spike for the industry's market performance by any means; according to Pachter, the outlook for the coming years is a positive one. "We believe that the current generation console cycle is far from over," he commented in a report last week. "We expect the transition between this console cycle and the next to be very smooth. We expect industry revenues to grow in excess of 20% in 2003 and 2004, and to decline slightly to around 10 - 15% growth in 2005."

"We believe that Sony's plan to introduce a handheld PlayStation in 2004 has the potential to add as much as 5 - 10% to industry sales in 2005, making the transition even smoother than our forecast. If industry sales continue to grow at a 15 - 20% clip for the next several years, the U.S. publishers should all benefit immensely, and their stocks should perform well."