Key Takeaways

Shares of video game maker Electronic Arts ( EA ) have fought their way back after plummeting earlier this year.

Shares of EA finished Friday a bit under $147 as Oppenheimer analysts called for them to keep rising. The investment bank raised its price target to $170 from $140 in a Friday note, well above the Visible Alpha average of Wall Street analysts near $144 and one of the highest around. The latest move has the shares roughly flat for the year, marking a climb off January lows below $120 driven by a worrisome outlook .

Oppenheimer in part credited the new Premium Pass in the EA Sports FC franchise for its bullish outlook, as an analyst said in the note that the firm expects the feature to “provide incremental, multi-year bookings growth tailwind previously unexpected by investors.”

The analysts said the pass has proven to be a monetization tool that works for games like Fortnite, Call of Duty, Valorant, and Overwatch 2, as it is often incremental to other monetization models, like premium in-game items, and it gives developers more control over user engagement and in-game economy.

Oppenheimer said its bullish estimate could prove to be too aggressive if the console-refresh cycle fails to meet investor expectations over the next few years, if sales of older games fall at a higher rate than their replacements growth, or if EA can't continue to tightly manage its operating expenses .

“While EA enjoys successful evergreen [video game] properties like Madden NFL and FIFA, future growth will suffer if consumer perception of microtransactions turns negative,” the report also said.

Microtransactions are transactions made electronically that allow gamers to make in-game purchases of items such as currency and loot boxes, and to tip players. Newer platforms such as Fortnite generate revenue almost entirely from microtransactions.

EA is responsible for some of the most popular game franchises, including Battlefield, EA Sports, and The Sims. The company is expected to report fourth-quarter and full-year earnings on May 6.

Read the original article on Investopedia