Today: Electronic Arts gets huge recommendation from Jefferies, as the company’s lineup of games is the “best we’ve ever seen.” Also: Icahn sells Netflix stake, Apple makes peace with indie bands.
The lead: Electronic Arts gets big upgrade as consoles approach ‘sweet spot’
Electronic Arts’ stock jumped 1.65 percent, or $1.10, to 67.68, on Wednesday after Jefferies upgraded it from “hold” to “buy.”
The company’s stock has gained 80 percent in the past 52 weeks and has reached a 10-year high, and Jefferies believes that the Redwood City video-game maker still has a lot more growing to do, raising its target price from $58 to $80.
After a largely successful E3 last week, Jefferies says the video game sector is about to reach “the sweet spot of the console generation.” It is projected that 50 million next-generation consoles will be in homes by the end of the year, a growth of about 69 percent year-over-year. By the end of 2017, that number could reach 100 million units, Jeffries said. Video game companies can capitalize on this growth, because while the consumer base is expanding, development costs remain relatively flat.
“EA looks well positioned against two multi-year tailwinds: faster than expected console sales and the transition to higher-margin digital revenue,” said Jefferies analyst Brian Pitz.
Pitz also believes EA’s lineup for video games is the “best we’ve ever seen.” EA showed the latest Madden and FIFA games, the next installment in the critically acclaimed “Mass Effect” series, and the highly anticipated “Star Wars Battlefront” at E3.
TheStreet echoed Jefferies’ high hopes for EA, also rating the stock as a buy.
“The company’s strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, solid stock price performance and increase in net income,” wrote TheStreet’s rating team.
Jefferies’ optimism for the video game industry extended to Take-Two Interactive as well, owner of Rockstar Games, the developer of the “Grand Theft Auto” series, upgrading that stock to “buy” and raising the target price from $29 to $35. With virtual reality getting a lot attention, Jefferies also advisers investors to keep an eye out for Sony and Microsft.
SV150 market report: Icahn sells Netflix stock, turns $1.6 billion profit
U.S. stocks were in the red Wednesday as investors begin to lose hope regarding negotiations with Greece.The major indexes all dropped close to 1 percent.
During early trading, Netflix reached an all-time high before falling later, closing with a decrease of 0.38 percent, or $2.58, to $678.61, as Carl Icahn sold his stake in the company. The 79-year-old billionaire held 1.41 million Netflix shares as of March, according to Bloomberg News, and paid an average of $58 a share in 2012. His latest sale turned a profit of up to $700 million.
Icahn at one point held over 5.5 million Netflix shares, and overall, he has reaped a profit of at least $1.6 billion from selling Netflix shares over the past three years. He currently also owns 53 million Apple shares, worth about $6.8 billion.
Speaking of Apple, the Cupertino company’s stock jumped up 0.85 percent, or $1.08, to $128.11, as top indie music labels were able to strike a deal with Apple, bringing bands like Radiohead and Arcade Fire to its upcoming Apple Music streaming service.
Google stock fell 0.86 percent, or $4.82, to $558.57, as the Mountain View tech giant announced that they will be building a $600 million data center in Alabama.
Yahoo was up 0.71 percent, or 29 cents, to $40.84, as CEO Marissa Mayer met with shareholders today and announced deals with Oracle and Katie Couric. Mayer wrote a letter to shareholders detailing how Yahoo’s products have been doing and laying out the future direction of the company.
Facebook was up 1.12 percent, 98 cents, to $88.86, as the Menlo Park social network announced that users could use its Messenger app without having a Facebook account. HBO will also be partnering with Facebook to premiere episodes of two new comedy series, further showing the growth of Facebook as a video platform.
Adobe stock dropped 0.18 percent, or 15 cents, to $83.40, as the company had to release an emergency security fix for a bug that allowed hackers to overtake a user’s entire system.
Twitter fell 0.55 percent, or 19 cents, to $35.17, as the company invested in arena and stadium app creator VenueNext.
VMware fell 0.36 percent, or 33 cents, to $90.36, as the Palo Alto virtualization-software company was added to Goldman Sachs’ “America’s Conviction List,” maintaining a “buy” rating.
Silicon Valley tech stocks
Up: Apple, Yahoo, Facebook, Zynga, Electronic Arts
Down: Google, Oracle, Intel, Cisco, HP, Ebay, Gilead, Linkedin, Tesla, Twitter, Pandora, Adobe
The SV150 index of Silicon Valley’s biggest companies: Down 3.16 or 0.18 percent, to 1,797.38.
The tech-heavy Nasdaq composite index: Down 37.68, or 0.73 percent, to 5,122.41.
The blue chip Dow Jones industrial average: Down 178.00, or 0.98 percent, to 17,996.07.
And the widely watched Standard & Poor’s 500 index: Down 15.62, or 0.74 percent, to 2,108.58.
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