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EA Stock Soars Like ‘Star Wars’ Millennium Falcon After Q4 Beat

Electronic Arts ( EA ) stock rocketed higher on Wednesday, a day after the video game publisher reported better-than-expected March-quarter earnings, thanks to hot games like “Star Wars Battlefront.” EA stock was up 12%, near 72.50, in afternoon trading on the stock market today . The stock is at its loftiest point since touching an all-time intraday high of 76.92 on Oct. 29. The Redwood City, Calif.-based company said late Tuesday it earned 50 cents a share excluding items on sales of $924 million in its fiscal fourth quarter ended March 31. Analysts polled by Thomson Reuters had expected EA to earn 42 cents a share on sales of $889 million. On a year-over-year basis, adjusted EPS rose 28%, and revenue inched up 3%. “We grew non-GAAP net revenue, profitability and cash flow to record highs,” Chief Financial Officer Blake Jorgensen said in a statement . “Leveraging our great portfolio of brands and live services has enabled us to break records across our key financial metrics. We expect to drive strong revenue, earnings and cash flow growth into the future.” EA credited “Star Wars Battlefront” and sports games, such as “Madden NFL 16″ and “FIFA 16,” for its gains in Q4. For its current fiscal 2017, EA expects to earn $3.50 a share excluding items on sales of $4.9 billion. That compares with fiscal 2016 results of $3.14 EPS on sales of $4.57 billion. EA hopes to continue its strong performance with new games this year, such as “Mirror’s Edge Catalyst,” due out June 7, and “Battlefield 1,” set for release Oct. 21. Also in the pipeline are “Titanfall 2,” scheduled for fiscal Q3, and “Mass Effect: Andromeda,” set for late Q4. New Star Wars Games Coming From EA Jefferies analyst Brian Pitz maintained his buy rating on EA stock but raised his price target to 105 from 95. “We continue to believe EA is poised to benefit from numerous multiyear tailwinds, including fast sales of consoles and ever more direct-to-consumer digital downloads, which drive improved profitability,” Pitz said in a report. Benchmark analyst Mike Hickey also reiterated his buy rating on EA and inched up his price target to 82.64 from 81.48. Key factors driving his enthusiasm for the company include expectations for continued sales and earnings growth, a compelling game slate ahead and growth of digital downloads and services, Hickey said. Wedbush analyst Michael Pachter reiterated his outperform rating on EA and 12-month price target of 86. “The company provided greater visibility into its long-term release schedule, expecting to launch at least one Star Wars title each year over the next three to four years,” he said in a report. “In fiscal 2018, it expects to launch a Star Wars Battlefront sequel. “In fiscal 2019, it expects to launch a Star Wars action game from Motive Studios and Visceral Games. It also expects to launch a Star Wars game from Respawn Entertainment, which we have penciled in for fiscal 2020. In addition to its Star Wars efforts, EA expects to launch a new, unannounced IP (intellectual property) in fiscal 2018.” Last week, Activision Blizzard ( ATVI ) reported better-than-expected first-quarter sales and earnings , thanks to a boost from newly acquired mobile game publisher King Digital Entertainment. A third major video game publisher, Take-Two Interactive Software ( TTWO ), is scheduled to report fiscal-fourth-quarter earnings on May 18.

Apple-Samsung Battle In China To Force Qorvo, Skyworks Volatility

Apple ( AAPL ) and Huawei will take share from Samsung and Xiaomi within the Chinese smartphone market, leading to mass volatility and an inventory work-down for chipmakers like Broadcom ( AVGO ), Qorvo ( QRVO ) and Skyworks Solutions ( SWKS ), an MKM analyst predicted Wednesday. Shares of Broadcom, Qorvo and Skyworks were up a fraction each in early afternoon trading on the stock market today , while Apple stock was down a fraction. Last month, Apple reported March-quarter sales that missed views for the first time since 2003, undercutting chip stocks, which have broadly fallen since. The Apple report bolsters concerns of a smartphone slowdown, fresh off worries that Chinese smartphone saturation would stunt further growth. But, MKM analyst Ian Ing notes, the brimming Chinese market is still buying. Of 1,000 Chinese respondents in an MKM survey, more than 60% plan to buy a new smartphone within the next three to six months vs. less than 25% of U.S. respondents, Ing wrote in a research report. Of those in China, 38% plan to switch brands. “Chinese consumers are even more gadget-friendly relative to U.S. consumers,” Ing wrote. “Ownership is higher across smartphones, PCs and tablets in rank order.” Nearly 97% of Chinese consumers own a smartphone vs. 84% of Americans, but 25% of Chinese respondents plan to add another smartphone account — likely expanding to children and the elderly — vs. only 7.5% of Americans, Ing wrote, suggesting that Chinese users refresh their smartphones annually. Advances in wireless charging and fingerprint sensing will drive further adoption, he wrote. In smartphones, Apple, Huawei and LeTV look likely to take share from Xiaomi, Samsung and Lenovo, Ing wrote. Chinese consumers are more driven by brand (68% vs. 43% of Americans) and less by cost (33% vs. 61% of Americans). Those dramatic swings in share could affect chipmakers like Qorvo and Skyworks, which are 32% and 20% exposed to China, respectively. Ing estimates 40% of Qorvo’s mobile sales stem from China. Fellow Apple suppliers Qualcomm ( QCOM ) and Broadcom are less exposed — mid-teens and less than 10%, respectively, Ing said. “That said, Qorvo is favorably exposed to Huawei as a 10% customer,” he noted.

Jazz Pharma Rises As Competitive Position Grows Stronger

Specialty drugmaker Jazz Pharmaceuticals ( JAZZ ) was trading up Wednesday morning as its lead drug staved off competition until the end of 2025, even though the company missed Q1 estimates late Tuesday. Jazz has been embroiled in litigation over its narcolepsy treatment Xyrem, as seven different generic-drug makers have been challenging its aging patents. On Tuesday’s earnings conference call with analysts, CEO Bruce Cozadd said that Jazz had reached a confidential settlement with two of them, Ranbaxy and Wockhardt Bio, which would allow them to start selling generic Xyrem, but not until Dec. 31, 2025. The news led Mizuho Securities analyst Irina Koffler to upgrade Jazz Pharma stock to buy from neutral, and raise the price target to 193 from 137. “Jazz’s announcement of its late 2025 Xyrem settlements was the upgrade signal we were looking for,” Koffler wrote in a research note. Bargaining From Strength Leerink analyst Jason Gerberry raised his price target to 198 from 137 while maintaining an outperform rating. He wrote that the patent launch was a year later than he’d been modeling, and came after last month’s favorable decision from the patent office declining to institute 18 claims Ranbaxy made against Jazz’s Xyrem patent, meaning that Ranbaxy would have to take Jazz to open court instead of banking on an inter partes review (IPR) ruling set for July. “Given favorable first-half developments in the IPR dispute … we believe Jazz is well positioned to entice the other challengers to accept similar settlement terms, eliminating an important stock overhang,” Gerberry wrote in his research note. The news lifted Jazz Pharma stock as much as 5.5% in early trading on the stock market today , though by midday shares were up just 1.5%, near 150, as Jazz reported a weak first quarter. Jazz’s earnings rose 14% over the year-earlier quarter to $2.26 a share, 5 cents short of analysts’ consensus, according to Thomson Reuters. Revenue climbed 9% to $336 million, missing consensus by almost $3 million. Jazz nonetheless added 20 cents to its 2016 EPS range, now $11.10 to $11.50, while affirmed revenue guidance of $1.49 billion to $1.55 billion. The earnings hike came entirely through share repurchases. Last year, the company made $9.52 a share on $1.325 billion in sales.