Credit: Shutterstock photoOn the surface, video game maker Electronic Arts (EA) and The Walt Disney Co. (DIS) may not have much in common. But dig a little deeper, and they do have one thing that ties them together, an iconic franchise you may have heard of: Star Wars.
Disney acquired LucasFilms, the owner of the Star Wars and Indiana Jones franchises, in 2012 for $4 billion. Thanks to that deal, the first Star Wars movie to be released in a decade is generating massive excitement. Just look at the nearly 60 million views on YouTube for the Star Wars: The Force Awakens teaser.
EA is also slated to benefit from the movie, thanks in part to its upcoming release, Star Wars Battlefront.
EA, which reported better-than-expected second quarter results, hinted that guidance for the game could be better than first thought, Pacific Crest Securities analyst Evan Wilson wrote in a research note. "Management did not formally update its guidance of 9 million-10 million units for Star Wars Battlefront, but did hint at potential for more given its reception at E3 in June," Wilson wrote. Wilson rates EA shares Buy with a $60 price target.
EA posted earnings of 15 cents a share on $693 million in revenue. Analysts were expecting earnings of 2 cents a share on $654 million in revenue.
Given the excitement surrounding the franchise and the movie, there are some on Wall Street expecting EA to sell near 20 million units, which could boost earnings noticeably.
Wilson expects EA to earn $3 a share in 2016, but noted that the company's guidance is conservative.
The optimism surrounding the Star Wars movie is astronomical, with Morgan Stanley recently stating in a research note its global box office could surpass $2 billion, a level seen by only Avatar and Titanic.
As such, the buzz surrounding Star Wars Battlefront continues to increase, which is likely to help boost EA's stock into year-end. "We think optimism has the potential to carry the stock higher into the big release of Star Wars, but we continue to look for a better entry point before getting more constructive on the name," Wilson wrote.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
