Electronic Arts to Acquire Playdemic for $1.4B

Electronic Arts (EA) has reached a $1.4 billion deal to acquire AT&T (T) and WarnerMedia’s mobile game studio Playdemic. The acquisition aligns with the company’s sports mobile growth strategy focused on delivering exciting experiences to half a billion players worldwide.

Playdemic will be a significant addition, expected to bolster Electronic Art’s portfolio of offerings in some of the fastest-growing genres. The WarnerMedia unit is best known for the award-winning game Golf Clash, which has witnessed over 80 million downloads and clinched some of the biggest industry awards.

Playdemic’s expertise in creating mobile games, merged with EA’s IP, should go a long way in expanding other franchises and enhancing growth in mobile experiences. (See Electronics Arts stock chart on TipRanks)

“Playdemic is a team of true innovators, and we’re thrilled to have them join the Electronic Arts family. In addition to the ongoing success of Golf Clash, the talent, technology and expertise of Playdemic will be a powerful combination with our teams and IP at Electronic Arts. This is the next step building on our strategy to expand our sports portfolio and accelerate our growth in mobile to reach more players around the world with more great games and content,” said Andrew Wilson, CEO of Electronic Arts.

The $1.4 billion bid is subject to customary adjustments. It will be paid in cash at closing and retained by AT&T.

Baird Equity Research analyst Colin Sebastian maintains a Buy rating on the stock with a $160 price target, implying 15.42% upside potential to current levels. According to the analyst, EA’s push to acquire Playdemic makes a lot of sense given its focus on enhancing its mobile development capabilities.

“We remain optimistic on the interactive entertainment sector with multiple “disruptive” trends likely increasing the value of video game software. EA has a solid lineup of game franchises – both owned IP and licenses. EA remains one of the leading console, mobile and PC game publishers, with a strong base of recurring revenue streams,” Sebastian wrote in a research note to investors.

Consensus among analysts is a Moderate Buy based on 14 Buys and 5 Holds. The average Electronics Arts analyst price target of $163.28 implies 17.79% upside potential to current levels.

EA scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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