EA acquiring Playdemic from WarnerMedia: time to buy?

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on Jun 23, 2021
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  • EA is buying Playdemic, the creators of the Golf Clash mobile game.
  • The acquisition is valued at about $1.4 billion and will add to EA’s mobile game offerings.
  • Electronic Arts stock price fell 1.5% Wednesday, creating an exciting opportunity to buy.

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Electronic Arts inc. (NASDAQ:EA) is buying Playdemic, the creators of the Golf Clash mobile game, from WarnerMedia. The company sees this as an opportunity to improve its mobile offerings by teaming up with one of the best mobile game creators.

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EA shares pulled back 1.5% on Wednesday but are still up nearly 60% since March last year. The stock is down more than 6% since the start of last week. 

Fundamentals overview: EA is potentially undervalued

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Electronic Arts stock looks potentially undervalued based on its forward P/E ratio of 19.84. However, analysts expect earnings to decline by more than 72% this year before bouncing back 10% next year. Therefore, the stock could pull back before establishing a more robust rally. 

The company could experience an average earnings growth of about 15% for the next five years. Therefore, it could be a great long-term buy.

Source – TradingView

Technical overview: buy the rebound

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Technically, EA stock has pulled back closer to oversold conditions in the 14-day RSI. The stock also trades just above the 100-day MA.

Investors can target short-term rebounds at $143.83 and $149.09. The key support levels are $134.02 and $128.23.

Bottom line: EA investors can buy the short-term rebound

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EA seems poised for a short-term rebound and looks relatively undervalued. However, earnings growth constraints this year could see EA’s share price fall further.

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